MAC: Mines and Communities

Land Battles Threaten Posco's Indian Steel Project

Published by MAC on 2007-03-19
Source: Reuters

Land battles threaten POSCO's Indian steel project


19th March 2007

DHINKIA, India - A tense stand-off with farmers unwilling to give up their land threatens India's largest-ever foreign investment project, a $12 billion steel plant planned by South Korea's POSCO.

Opponents of the project have taken heart from events in neighbouring West Bengal, where plans to seize farmland for a chemicals complex were shelved after police killed 14 protesters.

"This has had a very good effect on the people struggling against the POSCO project," said protest leader Abhay Sahu. "This is an opportune time for us to move forward."

The controversy could cast a shadow over India's attractiveness as an investment destination, officials said.

Supporters of the project were already frustrated that the government in the eastern state of Orissa had done little to back it, apparently scared of provoking trouble after protests over another steel plant cost 13 lives last year.

Clashes between supporters and opponents of the POSCO project injured 50 people this month, and angry farmers have erected a bamboo gate at the entrance to the village of Dhinkia to keep outsiders away.

POSCO spokesman Shashanka Pattnaik said the company remained confident the project would go ahead, and was "very, very hopeful" work will start by October, after missing an earlier target date of April.

But a senior government official told Reuters he thought the project might not get under way until early next year and said there was perhaps a 25 percent chance it might never happen.

"POSCO are pretty serious but they can't wait indefinitely," he told Reuters, speaking on condition of anonymity.

"The risk for us is that if we don't get it right, no big-ticket FDI will look easily towards Orissa in particular or generally towards India."

The issue of acquiring farmland for factories has become an explosive one as industrialisation gathers pace in eastern India.

In January 2006, 13 people were shot and killed by police during a protest over a plant proposed by Tata Steel in Kalinga Nagar in Orissa.

That incident has all but paralysed the state government over the land issue, analysts said.

Chief Minister Naveen Patnaik offered little to reassure POSCO's supporters in an interview with Reuters.

"We are trying to convince people but in a humane way and in a rational manner, especially after the tragic incident of Kalinga Nagar," he said. "I certainly hope that it will happen, I think it takes time, but I am sure it will happen."


There are other problems. As part of the agreement signed in June 2005, Orissa promised to grant prospecting and captive mining leases to supply the plant with 600 million tonnes of iron ore over 30 years.

But state-run Kudremukh Iron Ore says it has a prior claim to one prospecting area and has gone to the courts.

POSCO also needs official permission to convert around 2,700 acres of forest for industrial use, a potentially complex and time consuming procedure.

But it's probably in fields around the villages of Nuagaon and Dhinkia that the battle for POSCO's project, which aims to produce 12 million tonnes of steel a year, will be won or lost.

Orissa's government says its rehabilitation package for displaced farmers is among the best, offering cash and employment for at least one member of each family losing all its land.

POSCO has promised to help find plots for landowners.

But many farmers are not convinced, suspicious after other firms broke similar promises and jealous of a livelihood growing betel vines in the sandy soil and fishing in the area's creeks.

"IOCL (Indian Oil) promised to give us jobs when they built a refinery near here but they backtracked, so how should we believe POSCO," said 55-year-old Dhruba Charan Palai, bare chested in the heat with a cotton lungi wrapped around his waist.


POSCO hired 230 villagers to carry out a socio-economic survey to help draft a rehabilitation package. But police advised them not the enter the villages after the latest violence.

"The government has not taken a single step to solve the problem," said Tamil Pradhan, leader of the pro-POSCO movement. "Anti-POSCO people have been beating our people and setting fire to our betel plants."

The problem is that most of the families living in the project site don't own their land, but grow vines -- whose leaves are used to wrap the paan which many Indians chew -- on what is officially government land.

Many have been here for generations, but have no idea what compensation they will get.

"There are 20 million displaced people in India and they are in real trouble," said 48-year-old Sudhir Dalei. "We will be displaced and who will take care of us?"

"We don't want compensation, we just don't want to leave," said 48-year Dhira Pradhan. "If we leave our land, it will be over our dead bodies."

POSCO spokeswoman Soo Jung Kim said the company recognised the concerns and was working to build trust.

"When we say something, we do it," she said. "Here they haven't seen many examples of that, and they have doubts about companies, but our job is to reduce that gap and to prove we are sincere and committed."

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