People's Democracy

ORISSA 

Signing Away The State To POSCO

Damning Conditionalities In The MoU

Janardan Pati

THE signing of a memorandum of understanding (MoU) by the government of Orissa with the Pohang Steel Company (POSCO) of South Korea on June 22, 2005 sparked off strong opposition in the state. The signing of MoU was preceded by severe debate not only within the state but also through out the country. Despite this both the state government and POSCO are maintaining secrecy over the fine print of the MoU, the exact conditionalities and the real impact on the state in various aspects.  It is a matter of regret that the people of the state are being denied information and the state chief minister dismissively suggests to those seeking information to “search internet”.

If one has to understand the reasons behind the stiff opposition to this deal, it is imperative to know the conditions imparted in the MoU. Certain details of the MoU have become public after the actual signing and they reveal a total surrender of the wealth of the state to POSCO by the state government. The people of Orissa, who in the past fought against the state government on the MoUs it signed with Jindal and Vedanta companies, are sure to intensify their opposition to the POSCO deal.

As per the MoU, POSCO will construct a steel plant at Paradeep in Jagat Singhpur district of Orissa with an annual production capacity of 12 million tonnes steel. The company will spend Rs 51,000 crore for this plant in phases. It has been stated that the plant will produce 3 million tonnes of steel by the year 2010 and 12 million tonnes by 2016. The POSCO plant will be much bigger than the Rourkela steel plant (RSP) which will complete 50 years in another two years. But in comparison of RSP’s production of 1.4 million tonnes, POSCO will produce 12 million tonnes of steel. In this context one can imagine about the scale of POSCO plant.

THE REAL IMPACT

The government of Orissa will provide land for the plant and its office in the state capital Bhubaneswar. The government has to acquire 20-25 acres of land in Bhubaneswar and hand it over to POSCO for its office. At what price the company will take this land has not been mentioned. The company will acquire four thousand acres of land near Paradeep for the plant. Apart from this it will need more land to store lakhs of tonnes of coal. Over and above this, the company will acquire another two thousand acres of land. So the total land to be given to POSCO comes to 6500 acres. Further, the company will be given land for communication and water provision. It is mentioned in clause 5, para 5 of the MoU that after acquiring the land, the same will be handed over to the company by the government. It is well-known fact that such lands are given away by governments to companies at nominal prices.

The MoU is silent on what happens to the displaced people; whether alternate land will be provided or not. It should be mentioned here that those people who were displaced due to Hirakud dam are as yet to be provided land.

Apart from land, the Naveen Patnaik government has committed itself to put at the disposal of POSCO important sources of raw material enabling it to freely exploit. Let us see what they are:

• Coal: POSCO plant will not only produce steel, but also electricity out of coal. Till now no coal mine of our country has been handed over to any foreign company. But the state government has committed to recommend this to the central government so that POSCO can get captive coal mines. Today, some states are producing electricity after purchasing coal from Orissa, but POSCO will not purchase coal. It will be given coal mines to produce electricity. This is subsidising the foreign company at the cost of people.

• Iron Ore: It is mentioned in the MoU that POSCO requires 600 million tonnes of iron ore and that the company will be provided the same. The company will exchange 30 per cent of this ore with iron ore of higher quality by exporting it. But for this, the company will not spend a pie. Because POSCO will not purchase iron ore from Orissa. It will take it almost free of cost because of the royalty route adopted by the government. It may be noted the prevalent market rate for one tonne of iron ore ranges from Rs 2000 to Rs 26,000. Over and above this, POSCO will take away 400 million tonnes of iron ore for its South Korean company. In effect the company will be taking out of Orissa 1000 million tonnes of iron ore. Although it was declared from the beginning, the state government has repeatedly obfuscated the truth by clarifying that POSCO will be given only 600 million tonnes of iron ore.      

So, the value of 600 million tonnes of iron ore for POSCO’s Paradeep plant even at a conservative estimate of Rs 2000 would be Rs 1,20,000 crore. If the extraction cost of Rs 24,000 cr (@ Rs 400 per tonne) is removed the company is getting a bonanza of Rs 96,000 crore. And this would continue for 30 years with definite cost escalation. Taking this into account, according to one estimate the government of Orissa will dole out Rs 10 lakh crore (Ten lakh crores of rupees) worth of iron ore to POSCO in 30 years.

This is not taking into account the additional 400 million tonnes of iron ore the company will take away to South Korea. Besides iron ore, chrome and manganese will be provided to the company by Orissa Mining Corporation (OMC). Of course, it is not mentioned in the MoU to what extent it will take.

According to the MoU, iron ore extraction will be made for 30 years and it can be extended further for a period of 20 years. It is mentioned in the MoU that the state government will make efforts to provide POSCO sufficient quantities of limestone and dolomite at concessional rate. Clearly, the state government is not satisfied with giving away of only iron ore and coal.

Water: The state government has agreed to provide water to POSCO steel plant at Paradeep from Jobra Barrage on Mahanadi river. The MoU is silent about             the quantity of water to be provided. Not only that the questions of what happens to the lands which were being irrigated by these two canals? How many cubic meters of water are being reserved in Mahanadi barrage? How much POSCO will take? How much water will be there during summer after discharge of water to POSCO? etc are  yet to be answered by the government.

Special Economic Zone: In order to strengthen the profit of POSCO, government of Orissa has committed itself to recommend to government of India to constitute a Special Economic Zone (SEZ). If granted, the company will be out of all sorts of control and regulations. None can compel POSCO to even pay tax in view of liberalised regime prevalent in SEZs.

Port: Another important aspect of the MoU is the conditionality that POSCO will construct a port of its own at Paradeep and will keep a berth of its own within the existing Paradeep port. If this is done, the income of Paradeep port will be hit hard and may even lose traffic as the ships will deliver and take cargo at POSCO port. All this may enable the government in future to sell Paradeep port to POSCO itself citing losses.

At a stretch, POSCO will be the owner of iron ore, coal mines, steel plant and port dock. The resources and wealth of Orissa will be under the control of a South Korean company. Ironically, this is being trumpeted as Orissa’s prosperity.

The freebies do not stop here. It is mentioned in the MoU that the central government, at its own cost, will construct Haridaspur-Paradeep and Bansapanl-Paradeep railway line for export of POSCO company’s iron ore. Apart from this, the company may construct a special railway line from the mines to the plant site and the government of Orissa will extend all sorts of help and make necessary arrangement. It will also construct roadways from Chandikhol to Paradeep and Cuttack to Paradeep without delay. Besides, all sorts of roads will be constructed in and around the mines area and plant site for communication facility.

In addition, senior IAS officers of the state will be put at the service of POSCO for implementation and coordination. One senior officer will be appointed as nodal officer and he will look after the interests of POSCO. It is mentioned in the conditionalities also that POSCO wants can accept foreign and indigenous private players as partners, whenever it finds necessary.

WHAT WILL ORISSA GET?

It is being said that in 30 years time, the government of Orissa will get Rs 22,500 crore and the central government Rs 89,000 crore i.e. a total of Rs 1,11,500 crore in the form of tax revenue. This works out to Rs 3,700 crore income per annum. But the fact that the government of Orissa will make effort for getting the status of SEZ is not factored in. If SEZ status is provided the then this income will simply vanish.

After giving POSCO iron ore worth Rs 10 lakh crore, uncountable coal reserves, 6000 acres of land, including 25 acres in capital Bhubaneswar, water from Jobra barrage, railway and roads at the cost of the government, a port etc, what will the people of Orissa get in return? For a start, thousands of families will be thrown out from their lands. However, the state government is saying that by year 2016, about 13,000 people will get direct employment and 35,000 people will get indirect employment. Why this calculation is not being provided in detail? In which sector and what type of qualified people will get employed?

It must be clear that POSCO is establishing its steel plant in Orissa for its own interest and profits. Earlier, the said company had planned to locate its plant in Brazil but since Brazil insisted that the company should purchase iron ore from Brazil at market rate, it backed out. Only then POSCO looked elsewhere and finally selected Orissa.

The question is why did not the Orissa government also insist on giving the iron ore at market rate like the Brazilian government, particularly when iron ore is being exported from Orissa to China and other countries at market rate. Why is the Orissa government showing so much extra sympathy to POSCO?

OUR ALTERNATIVE PROPOSAL

1.  When the government of Orissa is providing land, water, coal, iron ore, manganese, dolomite, chromite, railway lines, roadways and ports & dock to POSCO for its steel plant, then the plant should be in joint sector. Export of ores (which is an exhaustible resource) should be stopped. Instead, export of only value added products should be permitted.

2. Instead of giving mines on lease to companies, both foreign and indigenous, they must be provided required quantity of ores for their plants at the market price.

3. All displaced families should be provided alternate land and employment.

4. In the proposed port of POSCO at Paradeep, only the cargoes meant for POSCO should be handled. Concrete rules should be framed so that the cargoes handled at Paradeep port (government-owned PSU) should not be diverted to POSCO port. The rule should specifically state that in future also other cargoes will not be handled in private owned POSCO port at Paradeep.

If only the government of Orissa insisted on selling iron ore, coal and other minerals to POSCO at market price instead of giving them away for almost free, then Orissa could earn lakhs of crores of rupees. And with this amount the government could have provided irrigation facilities, construct roadways and provide education and health free of cost to the people. But this was not to be mainly because of the aggrandisement and self centredness of a handful of persons at the helm of affairs of the state and centre. The wealth of the state is being allowed to be blatantly looted by monopolists and MNCs. The day the people of Orissa will be aware of the heinous conditionalities of POSCO MoU, they will come forward to protect the wealth of the state. Slowly and slowly the cover over the MoU is being removed and the real truth is seeing the light of the day.

 (The writer is secretary, CPI(M) Orissa state committee)