A River, A Man: The State Responds to Dr GD Agarwal's fast to save Ganga
Dr Sanat Mohanty
In a response, the likes of which we have not seen in the last few decades, both the Government of Uttarakhand and the Government of India responded to 76 years old Dr. G. D. Agarwal's fast-unto-death. Retired professor of Indian Institute of Technology (IIT) Kanpur, Dr. Agarwal, was protesting planned projects on the Bhagirathi which threaten the perennial flow of the Bhagirathi and the Ganga.
Both central and the state governments have suspended work on the three projects and promise the maintenance of the perennial flow of the river under all circumstances. The central government has promised review by a high level committee before any further action.
Dr. Agarwal's fast prompted delegations by two independent groups (who could not be more unlike the other) to meet with state and central governments requesting action. The Alumni Association of IIT Kanpur and All India Associations of Sadhus met with the Central Government while representation was also presented to the Government of Uttarakhand.
The letter from the Ministry of Power, Government of India says:
[Begins]
"The Ministry has received the representation sent by the Alumini Association of I.I.T. Kanpur to the Hon'ble Prime Minister of 27th June 2008. This is with reference to your meeting in the Ministry with the Hon'ble Union Minister of Power, today, and on 25th June 2008, and your memorandum of the same date in respect of river Bhagirathi, and in continuation of this Ministry's D.O.No. 37/47/2008-H.II of June 26, 2008. I am directed to say that the government of India commits itself to suitably ensure perennial environmental flow in all stretches of river Bhagirathi. I have to inform you that the Chairman and Managing Director, NTPC has been directed to constitute a high level expert group, including your nominee to examine the various technical issues involved in ensuring the required flow in the river Bhagirathi to keep the river alive. The high level expert group will give its report within three months. We shall invite you for discussion as soon as the recommendations of this high-level expert group are received, in order to arrive at a mutually acceptable solution. We would request Prof. D. D. Agarwal to give up his indefinite fast. The Government assures you of the highest consideration of your concerns." [End]
A letter written in Hindi, and signed by Shatrughn Singh, Secretary of the Uttarakhand Government points out that two of the three proposed projects on the middle section of the Bhagirathi (Bhairav Ghati of 381 MW and Pala Maneri of 480 MW) are state initiatives. The third -- a 600 MW unit at Lohari Nagpala -- is a central government effort. It says that Rs 80 Crores has already been spent on the Pala Maneri Project.
It adds that the state government has decided to stop all work on the two state project with immediate effect and that the state government is committed to ensuring that the river stays unviolated and its perennial flow is maintained and will act to do so, requesting Dr. Agarwal to end his fast.
This has been a major decision by both state and central governments. Acting on this, Dr. Agarwal and his colleagues are planning future steps to raise public awareness about the eco-sensitivity of this region and the importance of maintaining the flow of all of India's rivers. The group led by Dr. Agarwal feels that local mobilization and awareness is necessary to ensure that this is achieved.
When Dr. Agarwal announced his decision to fast-unto-death to protest projects that would end Bhagirathi and Ganga as we know them, many (including this author) wondered whether this would be in vain. The success of his protest is perhaps a sign of the strength of his belief but also the strength of the technical background that was used to critique the projects and predict their impact on the river systems.
Numerous energy projects have been started or have been proposed on the Bhagirathi, Ganga and numerous other rivers that define the Gangetic plain. While energy is a real issue and must be addressed, the human, economic and environmental costs of death of these rivers far surpasses energy benefits -- any community can attest to that. While an energy crisis looms, this is not the choice that benefits anyone.
Dr. Agarwal's effort was successful -- but this is not the end of the story. Conservation of our rivers requires community involvement. Now.
Dr Sanat Mohanty
www.TheSouthAsian.org
Published in
Assam Times, Guwahati, Assam
The Seoul Times, Seoul, South Korea
News Track India, Delhi
My News, Delhi
Thai Indian News, Bangkok, Thailand
Bihar and Jharkhand News Service, Bihar/ Jharkhand
Media for Freedom, Kathmandu, Nepal
News Blaze, USA
Pakistan Post, Islamabad, Pakistan
Central Chronicle, Madhya Pradesh/ Chhattisgarh
The Bangladesh Today, Dhaka, Bangladesh
Bihar Times, Patna, Bihar
Tuesday, July 29, 2008
A River, A Man: The State Responds to Dr GD Agarwal's fast to save Ganga
A River, A Man: The State Responds to Dr GD Agarwal's fast to save Ganga
A River, A Man: The State Responds to Dr GD Agarwal's fast to save Ganga
Dr Sanat Mohanty
In a response, the likes of which we have not seen in the last few decades, both the Government of Uttarakhand and the Government of India responded to 76 years old Dr. G. D. Agarwal's fast-unto-death. Retired professor of Indian Institute of Technology (IIT) Kanpur, Dr. Agarwal, was protesting planned projects on the Bhagirathi which threaten the perennial flow of the Bhagirathi and the Ganga.
Both central and the state governments have suspended work on the three projects and promise the maintenance of the perennial flow of the river under all circumstances. The central government has promised review by a high level committee before any further action.
Dr. Agarwal's fast prompted delegations by two independent groups (who could not be more unlike the other) to meet with state and central governments requesting action. The Alumni Association of IIT Kanpur and All India Associations of Sadhus met with the Central Government while representation was also presented to the Government of Uttarakhand.
The letter from the Ministry of Power, Government of India says:
[Begins]
"The Ministry has received the representation sent by the Alumini Association of I.I.T. Kanpur to the Hon'ble Prime Minister of 27th June 2008. This is with reference to your meeting in the Ministry with the Hon'ble Union Minister of Power, today, and on 25th June 2008, and your memorandum of the same date in respect of river Bhagirathi, and in continuation of this Ministry's D.O.No. 37/47/2008-H.II of June 26, 2008. I am directed to say that the government of India commits itself to suitably ensure perennial environmental flow in all stretches of river Bhagirathi. I have to inform you that the Chairman and Managing Director, NTPC has been directed to constitute a high level expert group, including your nominee to examine the various technical issues involved in ensuring the required flow in the river Bhagirathi to keep the river alive. The high level expert group will give its report within three months. We shall invite you for discussion as soon as the recommendations of this high-level expert group are received, in order to arrive at a mutually acceptable solution. We would request Prof. D. D. Agarwal to give up his indefinite fast. The Government assures you of the highest consideration of your concerns." [End]
A letter written in Hindi, and signed by Shatrughn Singh, Secretary of the Uttarakhand Government points out that two of the three proposed projects on the middle section of the Bhagirathi (Bhairav Ghati of 381 MW and Pala Maneri of 480 MW) are state initiatives. The third -- a 600 MW unit at Lohari Nagpala -- is a central government effort. It says that Rs 80 Crores has already been spent on the Pala Maneri Project.
It adds that the state government has decided to stop all work on the two state project with immediate effect and that the state government is committed to ensuring that the river stays unviolated and its perennial flow is maintained and will act to do so, requesting Dr. Agarwal to end his fast.
This has been a major decision by both state and central governments. Acting on this, Dr. Agarwal and his colleagues are planning future steps to raise public awareness about the eco-sensitivity of this region and the importance of maintaining the flow of all of India's rivers. The group led by Dr. Agarwal feels that local mobilization and awareness is necessary to ensure that this is achieved.
When Dr. Agarwal announced his decision to fast-unto-death to protest projects that would end Bhagirathi and Ganga as we know them, many (including this author) wondered whether this would be in vain. The success of his protest is perhaps a sign of the strength of his belief but also the strength of the technical background that was used to critique the projects and predict their impact on the river systems.
Numerous energy projects have been started or have been proposed on the Bhagirathi, Ganga and numerous other rivers that define the Gangetic plain. While energy is a real issue and must be addressed, the human, economic and environmental costs of death of these rivers far surpasses energy benefits -- any community can attest to that. While an energy crisis looms, this is not the choice that benefits anyone.
Dr. Agarwal's effort was successful -- but this is not the end of the story. Conservation of our rivers requires community involvement. Now.
Dr Sanat Mohanty
www.TheSouthAsian.org
Published in
Assam Times, Guwahati, Assam
The Seoul Times, Seoul, South Korea
News Track India, Delhi
My News, Delhi
Thai Indian News, Bangkok, Thailand
Bihar and Jharkhand News Service, Bihar/ Jharkhand
Media for Freedom, Kathmandu, Nepal
News Blaze, USA
Pakistan Post, Islamabad, Pakistan
Central Chronicle, Madhya Pradesh/ Chhattisgarh
The Bangladesh Today, Dhaka, Bangladesh
Bihar Times, Patna, Bihar
Friday, April 18, 2008
POSCO not driven by philanthropy but shrewd planning to compensate displaced farmers
- An economic scam in the making -
Sandip K Dasverma and Dr Sanat Mohanty
To read in Hindi language, click here
Note: Earlier, Dr Mohanty and Sandip had co-authored three in-depth special analytical articles on POSCO steel project in Orissa. To read them, click on the titles below:
Orissa: An Economic Scam Coming?
POSCO Project is not an unquestionable boon for Orissa
Who will gain from the POSCO Project in Orissa?
Rediff News recently reported that the steel giant POSCO, currently planning to set up a $12 Billion effort in Orissa has agreed to pay higher levels of compensation to farmers who will be displaced from non-forest land.
This decision of POSCO is not driven by kind-heartedness, a sense of justice for those displaced or magnanimity but from shrewd planning and analysis of what they can get away with. An earlier analysis published widely had shown that the people and the state of Orissa are giving iron ore away at less than 0.5% of the open market prices.
As part of the initial deal, POSCO has promised a flat rate of royalty at USD 0.5/ tonne of iron ore to the Government of Orissa (for ore with at least 62% iron content). This results in less than Rs 1620 crores to Government of Orissa over time of the contract of 600 Million Tonnes. The current global market rate of iron ore is over USD100/tonne. In December 2007, the market was at USD 120/tonne. By this rate, 600 million tonnes of iron ore (that POSCO would mine) at greater than 62% iron content would result in Rs 288,000 crores. Wow! We suddenly realize that POSCO has effectively been given this ore free. Since the Memorandum of understanding (MOU ) in 2005, the Iron Ore prices have gone up by 20%, 19% & 70% respectively.
The indirect costs of this effort to the people of Orissa add up even further. Thousands of acres of land and millions of gallons of water given almost free to the company, coal at give away prices and the economic venture framed within an Special Economic Zone (SEZ) providing tax benefits to the company -- all of these steal from revenue from the people of Orissa. And yet, the government of Orissa has continued to argue that this project is for the good of the state.
People who will be affected by the project, however, have realized the harm they come to and have continued to oppose this effort in spite of extreme intimidation, threats, offer of jobs or money.
For the last three years, POSCO, backed by the state government as well as the Centre, has made consistent, systematic, yet unsuccessful attempts to 'take over' this highly fertile and ecologically fragile coastal area for its projects. The company's persistence has led the state government to thwart widespread popular resistance to the project, and lately to step up pressure by using force. For the last four months, 18 battalions of police have been deployed around these villages, occupying government school buildings. The administration had also barred the entry of essential supplies into these villages and restricted free movement of people in the region. But the unrelenting resistance to the project in the face of coercion, cajoling and various other pressure tactics proves that the stakes are higher for the affected people. The promise of 13,000 jobs used to lure people has had few takers here. Communities are convinced that livelihoods lost will probably be many times those gained. It is a lesson they have learnt after 60 years of 'industrial development' in the state that has brought little benefit to them.
On April 1st, on the day POSCO planned a ground breaking ceremony, hundreds of people from villages in the area planned a huge rally despite the large police presence (and the police firings in Kashipur and Kalyanagar in the back of every one's mind). POSCO decided to cancel the ceremony (saying it was owing to the absence of government clearance coming through) -- the rally went on.
It is in the context of these two trends that the decision of POSCO to compensate displaced people must be understood. POSCO gains truly humongous amounts of profits from the deal -- hundreds of thousands of crores and the people of Orissa get little. As the economic analysis concludes -- the government of Orissa and the company seem to have colluded for there is no way that Government of Orissa does not realize how much it loses from the deal. The human rights and displacement costs are insignificant compared to the profits -- it is an economic scam in the making. A good hypothesis is that the issue of displacement is being used by the Government of Orissa and POSCO to keep focus away from the economic loot and that sooner or later the company will have a change of heart and compensate those who will be displaced. Even 1000 crores in displacement compensation will be insignificant for the company and the scale of profits it will make. Thus, as per this hypothesis, with profits being delayed owing to protests, the company will invest in compensations, earn kudos from all sections for doing the right thing and being a socially responsible company and then rake in hundreds of thousands of crores while their paid lackey -- the Government of Orissa and its officers -- prevent any prying eyes from uncovering the economic scam playing out.
There is little that anyone can do to stop this now -- anyone but the people of Orissa. Unfortunately, most of the media in Orissa or in India have attempted to frame the protests as being anti-development but have refused to discuss the economic analysis of this project. The Oriya educated sections have been happy to bask in the few crores that have come to Orissa as part of this venture. The only path left then in for the people of Orissa to raise awareness of the economic implications of this project, the economic loot that plays out, protesting the government and the project nonviolently, joining those who are directly affected by it empathetically. The only path left is that of people's democracy.
Sandip Dasverma and Dr Sanat Mohanty
Also read:
Orissa: An Economic Scam Coming?
POSCO Project is not an unquestionable boon for Orissa
Who will gain from the POSCO Project in Orissa?
News Blaze, US
The Seoul Times, South Korea
POSCO not driven by philanthropy but shrewd planning to compensate displaced farmers
- An economic scam in the making -
Sandip K Dasverma and Dr Sanat Mohanty
To read in Hindi language, click here
Note: Earlier, Dr Mohanty and Sandip had co-authored three in-depth special analytical articles on POSCO steel project in Orissa. To read them, click on the titles below:
Orissa: An Economic Scam Coming?
POSCO Project is not an unquestionable boon for Orissa
Who will gain from the POSCO Project in Orissa?
Rediff News recently reported that the steel giant POSCO, currently planning to set up a $12 Billion effort in Orissa has agreed to pay higher levels of compensation to farmers who will be displaced from non-forest land.
This decision of POSCO is not driven by kind-heartedness, a sense of justice for those displaced or magnanimity but from shrewd planning and analysis of what they can get away with. An earlier analysis published widely had shown that the people and the state of Orissa are giving iron ore away at less than 0.5% of the open market prices.
As part of the initial deal, POSCO has promised a flat rate of royalty at USD 0.5/ tonne of iron ore to the Government of Orissa (for ore with at least 62% iron content). This results in less than Rs 1620 crores to Government of Orissa over time of the contract of 600 Million Tonnes. The current global market rate of iron ore is over USD100/tonne. In December 2007, the market was at USD 120/tonne. By this rate, 600 million tonnes of iron ore (that POSCO would mine) at greater than 62% iron content would result in Rs 288,000 crores. Wow! We suddenly realize that POSCO has effectively been given this ore free. Since the Memorandum of understanding (MOU ) in 2005, the Iron Ore prices have gone up by 20%, 19% & 70% respectively.
The indirect costs of this effort to the people of Orissa add up even further. Thousands of acres of land and millions of gallons of water given almost free to the company, coal at give away prices and the economic venture framed within an Special Economic Zone (SEZ) providing tax benefits to the company -- all of these steal from revenue from the people of Orissa. And yet, the government of Orissa has continued to argue that this project is for the good of the state.
People who will be affected by the project, however, have realized the harm they come to and have continued to oppose this effort in spite of extreme intimidation, threats, offer of jobs or money.
For the last three years, POSCO, backed by the state government as well as the Centre, has made consistent, systematic, yet unsuccessful attempts to 'take over' this highly fertile and ecologically fragile coastal area for its projects. The company's persistence has led the state government to thwart widespread popular resistance to the project, and lately to step up pressure by using force. For the last four months, 18 battalions of police have been deployed around these villages, occupying government school buildings. The administration had also barred the entry of essential supplies into these villages and restricted free movement of people in the region. But the unrelenting resistance to the project in the face of coercion, cajoling and various other pressure tactics proves that the stakes are higher for the affected people. The promise of 13,000 jobs used to lure people has had few takers here. Communities are convinced that livelihoods lost will probably be many times those gained. It is a lesson they have learnt after 60 years of 'industrial development' in the state that has brought little benefit to them.
On April 1st, on the day POSCO planned a ground breaking ceremony, hundreds of people from villages in the area planned a huge rally despite the large police presence (and the police firings in Kashipur and Kalyanagar in the back of every one's mind). POSCO decided to cancel the ceremony (saying it was owing to the absence of government clearance coming through) -- the rally went on.
It is in the context of these two trends that the decision of POSCO to compensate displaced people must be understood. POSCO gains truly humongous amounts of profits from the deal -- hundreds of thousands of crores and the people of Orissa get little. As the economic analysis concludes -- the government of Orissa and the company seem to have colluded for there is no way that Government of Orissa does not realize how much it loses from the deal. The human rights and displacement costs are insignificant compared to the profits -- it is an economic scam in the making. A good hypothesis is that the issue of displacement is being used by the Government of Orissa and POSCO to keep focus away from the economic loot and that sooner or later the company will have a change of heart and compensate those who will be displaced. Even 1000 crores in displacement compensation will be insignificant for the company and the scale of profits it will make. Thus, as per this hypothesis, with profits being delayed owing to protests, the company will invest in compensations, earn kudos from all sections for doing the right thing and being a socially responsible company and then rake in hundreds of thousands of crores while their paid lackey -- the Government of Orissa and its officers -- prevent any prying eyes from uncovering the economic scam playing out.
There is little that anyone can do to stop this now -- anyone but the people of Orissa. Unfortunately, most of the media in Orissa or in India have attempted to frame the protests as being anti-development but have refused to discuss the economic analysis of this project. The Oriya educated sections have been happy to bask in the few crores that have come to Orissa as part of this venture. The only path left then in for the people of Orissa to raise awareness of the economic implications of this project, the economic loot that plays out, protesting the government and the project nonviolently, joining those who are directly affected by it empathetically. The only path left is that of people's democracy.
Sandip Dasverma and Dr Sanat Mohanty
Also read:
Orissa: An Economic Scam Coming?
POSCO Project is not an unquestionable boon for Orissa
Who will gain from the POSCO Project in Orissa?
News Blaze, US
The Seoul Times, South Korea
Tuesday, April 15, 2008
Who will gain from the POSCO Project in Orissa?
[This article is the last part of a three-article series by Sanat and Sandip providing an in-depth analysis of
issues around POSCO Steel project in
With an analysis of direct and indirect economic analysis suggesting that the POSCO project has not been negotiated with the primary interest of the state of Orissa in
Citizens of Orissa need to demand more transparency from the Orissa state government in the project plan details. Has the opportunity cost been analyzed? What is the economic cost of water usage by POSCO? What is the cost of displacement? Clearly, agriculturalists in the neighborhood will suffer. What is the economic value of the loss in agricultural produce and in disruption in livelihoods of lakhs of farming families? Clearly the industry will not provide jobs to all these lakhs. We can estimate these numbers – there will be agricultural losses in the range of Rupees 100 crores per year, almost equal to gain in salary/wages from the plant each year. That is a significant amount. And it raises questions that the government needs to answer – and the Oriya society must ensure that the government answers these questions:
Published in
News Blaze, US
Scoop Independent News, New Zealand
Who will gain from the POSCO Project in Orissa?
[This article is the last part of a three-article series by Sanat and Sandip providing an in-depth analysis of issues around POSCO Steel project in
With an analysis of direct and indirect economic analysis suggesting that the POSCO project has not been negotiated with the primary interest of the state of Orissa in
Citizens of Orissa need to demand more transparency from the Orissa state government in the project plan details. Has the opportunity cost been analyzed? What is the economic cost of water usage by POSCO? What is the cost of displacement? Clearly, agriculturalists in the neighborhood will suffer. What is the economic value of the loss in agricultural produce and in disruption in livelihoods of lakhs of farming families? Clearly the industry will not provide jobs to all these lakhs. We can estimate these numbers – there will be agricultural losses in the range of Rupees 100 crores per year, almost equal to gain in salary/wages from the plant each year. That is a significant amount. And it raises questions that the government needs to answer – and the Oriya society must ensure that the government answers these questions:
Published in
News Blaze, US
Scoop Independent News, New Zealand
Tuesday, April 8, 2008
POSCO Project is not an unquestionable boon for Orissa
POSCO Project is not an unquestionable boon for Orissa
Sandip Dasverma and Dr Sanat Mohanty
[This is the second article in three-article series on POSCO Steel project in Orissa by Sandip and Sanat. To read the first article (Orissa: An economic scam coming?), click here (to read this first article in hindi, click here)]
..........................
The government of Orissa in 
As with any economic enterprise, economic plans of Government of Orissa in
Analysis of a direct economic impact highlights the immense loss to Orissa with this deal. But are there other benefits that Orissa gains – jobs for people? Infrastructure? Are there other indirect opportunity costs with this deal?
The Indirect Economic Impact
POSCO promises to invest $12 billion (Rs 48,000 crores) in setting up the steel plants and running them. Even assuming it employees 10,000 people (a large number given modern automation) at Rs. 10,000 per month (a high number since most of the employees wil
l be at lower pay scales), this accounts for Rs 3,600 crores for the 30 years of life of this project. Other economic efforts to sustain schools, services, small businesses etc are other benefits. Some of the investment will also help build infrastructure for mining which may affect local communities – roads, schools, electricity – and that will be 5% if one is magnanimous about ones numbers. The rest of the investment is mostly on equipment and services to support production – investment that does not necessarily trickle into the local economy.
Even accounting for such indirect benefits, the state of Orissa gets less than 5% of the price of iron ore that it would get in the global market. Why such criminal neglect of state's self-interest by state's captains?
On the other hand, activists from Orissa and other parts of the country have said that thousands of people will be displaced from more than 5000 acres of land that is being sequestered for this project. Given that people from past projects have not been rehabilitated, where will the new displaced go?
In addition, the economic activity of these thousands is significant - they were sustaining themselves through access to the land that they have lived in for over generations. Now, if pushed out without rehabilitation, not only is this lost economic activity but also an increased cost on cities where they will migrate. The Orissa government has not included this in its economic calculations.
Given the scale of profits from this venture and the criminal underselling of resources to POSCO, we think the state continues with this policy to keep attention away from the loot that is being played out.
In 2007 alone, private companies exported 47.6 million tonnes of iron ores but paid the Orissa government only Rs27/tonne for ores and Rs 11/tonne for fines – we have already lost greater than Rs 10,000 crore (the annual state budget of Orissa is Rs. 4,500 crore).
Thus, it seems likely that the Orissa government and POSCO will 'give in' to human needs and pay the oustees large amounts as rehabilitation. Even paying the oustees tens of lakhs of rupees hardly causes a dent in the profit margins. This comment is not to belittle the plight of the displaced – it is to point out that perhaps they are being used as pawns in an even bigger scam.
It is also important to ask, given such humongous profits, why are those whose lands are being snatched away without giving them market prices? How will the people whose land is being snatched away benefit from this deal?
That process of indirect accounting must also include the impact on supply of water. In a review of water withdrawal, Himanshu Thakar cites POSCO website that mentions it will withdraw over 250 million liters of water per day. How does this affect the water table of that region? Arguably, this water will be used for cleaning ores and processing for steel – how will the water be cleaned and what will be the state of its discharge? How will it be discharged and what is the impact of that on local communities? Both of these are important questions that make economic impact on the enterprise of the state – and at the very least should have been accounted for in Orissa's economic plans.
Orissa government has also promised to help POSCO acquire coal either from a Public Sector Unit or elsewhere at a very nominal royalty.
Central and Orissa state Governments of India have granted Special Economic Zone (SEZ) status for the steel plant and the POSCO owned port, which is unprecedented.
SEZs are exempt of the sales and import taxes. It is estimated that Indian government will lose Rs 89,000 crores and state government of Orissa will lose Rs 22,500 crores for SEZ alone. POSCO would have paid import tax on approx $6 billion of machinery with a loss to Indian central and state governments of 10 to 15%. This is another Rs 2,400 crores to Rs 3,600 crores subsidy, without any justification, as the competitors of POSCO, TATA and Mittals are paying that amount. There is no explanation of this action anywhere in the documents. This also does not account for duty to be paid on 12 million tonnes of steel every year for the 1st few years.
An analysis of both the direct and indirect economic impact of this project leads us to conclude:
* Orissa state government is clearly under-representing the interests of the people of the state. Even at global market conditions, it would have been able to get orders of magnitude greater benefits for the people than it is today as part of this deal
* Orissa state government has actually set up the deal where it is questionable whether the people of Orissa actually gain from this project or whether the opportunity cost of implementing this project outweighs the benefits. The project is certainly not an unquestionable boon as it is being made out to be.
Sandip Dasverma and Dr Sanat Mohanty
To read this article in Hindi language, click here
Published in:
The Seoul Times, South Korea
Assam Times, Assam, India
The Scoop Independent, New Zealand
News Blaze, USAThe Viewspaper
POSCO Project is not an unquestionable boon for Orissa
POSCO Project is not an unquestionable boon for Orissa
Sandip Dasverma and Dr Sanat Mohanty
[This is the second article in three-article series on POSCO Steel project in Orissa by Sandip and Sanat. To read the first article (Orissa: An economic scam coming?), click here (to read this first article in hindi, click here)]
..........................
The government of Orissa in
As with any economic enterprise, economic plans of Government of Orissa in
Analysis of a direct economic impact highlights the immense loss to Orissa with this deal. But are there other benefits that Orissa gains – jobs for people? Infrastructure? Are there other indirect opportunity costs with this deal?
The Indirect Economic Impact
POSCO promises to invest $12 billion (Rs 48,000 crores) in setting up the steel plants and running them. Even assuming it employees 10,000 people (a large number given modern automation) at Rs. 10,000 per month (a high number since most of the employees will be at lower pay scales), this accounts for Rs 3,600 crores for the 30 years of life of this project. Other economic efforts to sustain schools, services, small businesses etc are other benefits. Some of the investment will also help build infrastructure for mining which may affect local communities – roads, schools, electricity – and that will be 5% if one is magnanimous about ones numbers. The rest of the investment is mostly on equipment and services to support production – investment that does not necessarily trickle into the local economy.
Even accounting for such indirect benefits, the state of Orissa gets less than 5% of the price of iron ore that it would get in the global market. Why such criminal neglect of state's self-interest by state's captains?
On the other hand, activists from Orissa and other parts of the country have said that thousands of people will be displaced from more than 5000 acres of land that is being sequestered for this project. Given that people from past projects have not been rehabilitated, where will the new displaced go?
In addition, the economic activity of these thousands is significant - they were sustaining themselves through access to the land that they have lived in for over generations. Now, if pushed out without rehabilitation, not only is this lost economic activity but also an increased cost on cities where they will migrate. The Orissa government has not included this in its economic calculations.
Given the scale of profits from this venture and the criminal underselling of resources to POSCO, we think the state continues with this policy to keep attention away from the loot that is being played out.
In 2007 alone, private companies exported 47.6 million tonnes of iron ores but paid the Orissa government only Rs27/tonne for ores and Rs 11/tonne for fines – we have already lost greater than Rs 10,000 crore (the annual state budget of Orissa is Rs. 4,500 crore).
Thus, it seems likely that the Orissa government and POSCO will 'give in' to human needs and pay the oustees large amounts as rehabilitation. Even paying the oustees tens of lakhs of rupees hardly causes a dent in the profit margins. This comment is not to belittle the plight of the displaced – it is to point out that perhaps they are being used as pawns in an even bigger scam.
It is also important to ask, given such humongous profits, why are those whose lands are being snatched away without giving them market prices? How will the people whose land is being snatched away benefit from this deal?
That process of indirect accounting must also include the impact on supply of water. In a review of water withdrawal, Himanshu Thakar cites POSCO website that mentions it will withdraw over 250 million liters of water per day. How does this affect the water table of that region? Arguably, this water will be used for cleaning ores and processing for steel – how will the water be cleaned and what will be the state of its discharge? How will it be discharged and what is the impact of that on local communities? Both of these are important questions that make economic impact on the enterprise of the state – and at the very least should have been accounted for in Orissa's economic plans.
Orissa government has also promised to help POSCO acquire coal either from a Public Sector Unit or elsewhere at a very nominal royalty.
Central and Orissa state Governments of India have granted Special Economic Zone (SEZ) status for the steel plant and the POSCO owned port, which is unprecedented.
SEZs are exempt of the sales and import taxes. It is estimated that Indian government will lose Rs 89,000 crores and state government of Orissa will lose Rs 22,500 crores for SEZ alone. POSCO would have paid import tax on approx $6 billion of machinery with a loss to Indian central and state governments of 10 to 15%. This is another Rs 2,400 crores to Rs 3,600 crores subsidy, without any justification, as the competitors of POSCO, TATA and Mittals are paying that amount. There is no explanation of this action anywhere in the documents. This also does not account for duty to be paid on 12 million tonnes of steel every year for the 1st few years.
An analysis of both the direct and indirect economic impact of this project leads us to conclude:
* Orissa state government is clearly under-representing the interests of the people of the state. Even at global market conditions, it would have been able to get orders of magnitude greater benefits for the people than it is today as part of this deal
* Orissa state government has actually set up the deal where it is questionable whether the people of Orissa actually gain from this project or whether the opportunity cost of implementing this project outweighs the benefits. The project is certainly not an unquestionable boon as it is being made out to be.
Sandip Dasverma and Dr Sanat Mohanty
To read this article in Hindi language, click here
Published in:
The Seoul Times, South Korea
Assam Times, Assam, India
The Scoop Independent, New Zealand
News Blaze, USAThe Viewspaper
Thursday, March 27, 2008
Orissa: An Economic Scam Coming?
Orissa: An Economic Scam Coming?
Sandip Dasverma and Sanat Mohanty
“The Government of Orissa, desirous of utilizing its natural resources and rapidly industrializing the State, so as to bring prosperity and wellbeing to its people, has been making determined efforts to establish new industries in different locations. In this context, the Government of Orissa have been seeking to identify suitable promoters to establish new Integrated Steel Plants in view of the rich iron ore and coal deposits in the State.”
In the MoU, POSCO plans investment of approximately USD 12 Billion or Rs 48,000 crores. The numbers are awesome. Rs 48,000 crores could do much for a state that is faced with one of the poorest social and economic indices in the nation – in terms of literacy, health care, nutrition and mortality, earning power, etc. As part of Phase I, POSCO plans on setting up projects worth Rs 21,900 crores by 2012 and projects worth 21,500 crores as part of Phase II by 2016.
POSCO will set up an Indian subsidiary headquartered in
In a show of good intentions, the MoU also notes that:
“The Government of Orissa appreciates that the Company will be a responsible corporate house with a high involvement in employees' welfare and social development.”
The Oriya community is thus thrilled at the prospect of a major multinational investing in setting up the biggest iron and steel project in Orissa which will not only bring in an unheard amount of investment into the state but also provide for jobs and townships to help develop the people of the state. The Government of Orissa must be proud for having pulled this off.
And yet, there has been significant hue and cry on this deal. Environmentalist crying about a waterfall that could die – who cares about it when people are dying from starvation! Hills and scenic beauty will disappear – who cares if it provides stable livelihoods to a significant fraction or Orissa's people. Even the discussion on the Ridley turtles seems ridiculous from this perspective. The people of Orissa seem justified in arguing that similar penalties were paid in the development of Maharashtra, Karnataka or other more developed parts of
It is also fair to truly understand the details of this economic benefit that Government of Orissa believes will come to Orissa.
The Direct Economic Component
As part of the initial deal, POSCO has promised a flat rate of royalty at Rs 27/tonne of iron ore to the Government of Orissa (for ore with at least 62% iron content). This results in less than Rs 1620 crores to Government of Orissa over time of the contract of 600 Million Tonnes.
The current global market rate of iron ore is over USD100/tonne. In December 2007, the market was at USD 120/tonne. By this rate, 600 million tonnes of iron ore (that POSCO would mine) at greater than 62% iron content would result in Rs 240,000 crores. Wow! We suddenly realize that POSCO has effectively been given this ore free. Accounting for mining costs and the total investment package (less than 10% of the costs) the people and the state of Orissa are getting less than 1% of open market price of iron ore.
This is not a special deal for POSCO – similar (though smaller) deals are in the works with Tatas, Vedanta, Jindal, etc. Why is the Government of Orissa (and the Central Government) pursuing such deals? People in the business point to the strength of special interest groups and the mining lobby and that all political parties have received their dues from the lobby. Processes are encumbered with corruption – every truck load mined needs to pay the local MLA Rs 500 and a similar amount goes to the party coffers.
For all the excitement among the Oriya community, there have been few demanding accountability from Government of Orissa - why is the Government of Orissa is selling the ores at less than 1% of the global price. Surely, more money coming into the state coffer will be more helpful for people, will lead to more development?
After detailed analysis, some groups have demanded that the Government of Orissa set the royalty at 50% of market price, and that if the iron ore were to be converted to steel outside the state, the royalty be 80%. Even at this high a royalty, POSCO will be profitable. While Government of Orissa argued that this would allow other states to undercut Orissa and get a better deal, critics have suggested that these states form a coalition, like Organization of the Petroleum Exporting Countries (OPEC), to set prices. Such a coalition including the 5 states of Chattisgarh, Jharkhand, Orissa, Karnataka and Rajasthan is underway. Chief Ministers from these states met with the Prime Minister of India, on 19th of December and demanded a 20% royalty down from public demand of 50%. The Central Government of India haggled and is considering a royalty of 7.5-10%. The Government of Orissa seems too readily satisfied with this suggestion.
Such pressure does make the state respond. Now the state of Orissa will receive Rs 18,000 to 24,000 Crore in royalty (if this is made binding) as opposed to 1620 crores as per the earlier plan.
What reasons force these governments to undersell minerals at >90% below market prices? The state government has been very unwilling to provide details of the transactions, with the Government of Orissa initially claiming that disclosing such details of public funds went against confidentiality agreements (unless there are security threats, democratic governments globally have provided details of deals with private agencies). Why should Government of Orissa, with an annual budget of 4500 crores, let go 108,000 crores or 3600 crores per year for next 30 years and be satisfied with 600 crores/ year? (50% of 216,000 crores the price of 600 MT of
Sandip Dasverma and Sanat Mohanty
Published in:
Central Chronicle, Madhya Pradesh, India (29 March 2008)
The Seoul Times, South Korea (29 March 2008)
Scoop Independent News, New Zealand (29 March 2008)
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