Tribes Stall Steelmakers in India
http://online.wsj.com/article/SB10001424052748703697004574495511978316746.html?mod=googlenews_wsjBy PRASENJIT BHATTACHARYA And SAHIL MAHTANI
NEW DELHI—Steel companies have pledged billions of dollars to expand in India, but they are struggling to secure the land they need in two mineral-rich states because of fierce opposition from local tribes and slow-moving governments.
The standoffs in the northeastern states of Orissa and Jharkhand have hit two of the world's top five steel producers, ArcelorMittal and Posco, and are threatening to stall a key driver of India's industrial activity in the years ahead. According to the steel ministry, projects worth $82 billion are being held up because of delays related to land acquisition and environmental clearances.
Tribes in India have opposed steelmakers acquiring land for new projects. A protest last year against a planned ArcelorMittal plant in Jharkhand.
"India will face severe problems in expanding its steel-production capacity if the land-acquisition problem isn't dealt with soon," said N. K. Patnaik, executive director (Orissa), Uttam Galva Steels Ltd., an Indian steelmaker.
Companies bet that India's demand for steel will grow more than 10% a year in the next decade, led by India's gradual emergence as an auto-making hub. State and private spending on power plants, bridges, ports and a slew of low-cost housing projects are also expected to keep steel demand rising.
Land acquisition for new plants has been a problem for years as state governments and manufacturers seek to move farmers and others who live off the land to make way for industrial expansion.
About 66% of India's 275 million tons of new steel capacity in the next decade is expected to come in Orissa and Jharkhand, according to government data, because of the abundance of iron ore, coal and water, which are essential for setting up a steel plant. Few other states offer such possibilities, so shifting elsewhere is extremely difficult.
But nowhere has the land acquisition sparked as much anger and protest as in the two impoverished states, where a large portion of the population consists of tribal groups. These groups, often with the backing of activists and left-wing political organizations, have succeeded in halting land acquisition for several mining and industrial projects.
The issue attracted renewed focus recently after Lakshmi Mittal, chief executive of the world's largest steel producer, ArcelorMittal, vented his frustration over progress on new, or greenfield, projects earlier this month.
"The company continues to work on its two greenfield projects in Jharkhand and Orissa. However, in the event that land acquisition continues to prove difficult, we will start to search for alternate sites in India for our greenfield projects," Mr. Mittal said in a statement.
South Korea's Posco signed a deal with the Orissa government in June 2005 to set up a 12-million-ton-a-year steel plant but has yet to begin construction. "We are willing to offer both financial compensation and employment in our project," said Posco's general manager in India, S. K. Mohapatra. The company's projection is that plant construction could be completed by 2014.
Dayamani Barla, a prominent tribal activist in Jharkhand, says tribal identity is linked to land, forest and water, and once tribal people are displaced, their cultural and social identity would be destroyed. "Tribals can't live without the forest or without farming," she said. "Our battle is for saving our environment, forests, culture and social values."
Ms. Barla is the founder of the protest movement, Adivasi Moolvasi Astitva Raksha Manch (Indigenous Peoples Survival Forum), which has led protests against ArcelorMittal's proposed steel plant in the state of Jharkhand.
"Instead of destroying our forests, polluting rivers and destroying homes, the government should evolve policy to give only wastelands to industrial projects, so no conflict rises," she added.
Miners have been targeted too. The most vocal protest has been by Dongria Kondh, a tribal group in Orissa, protesting against the bauxite mines of Vedanta Resources in the Niyamgiri Hills of the state. In Jaduguda in Jharkhand, protests also have erupted over uranium mining.
In the face of angry protests, state governments consider it politically risky to push through projects. Many of the tribal groups live in forests, which are state property, but since they have lived there for centuries, governments don't want to antagonize them by forced eviction.
In September 2008, three land surveyors of Bhushan Power and Steel Ltd. were beaten up and their faces smeared with cow dung by villagers for conducting a land survey in Jharkhand for the company's proposed steel and power projects. Last year, hundreds of tribal members assembled near the proposed site of an ArcelorMittal steel plant chanting slogans such as "Go back Mittal."
"The tribal groups are not going to give up their land for any industrial project, be it Mittal or anyone else," said Dilip Minz, an activist with the Jharkhand Mines Area Coordination Committee. "Forced eviction of tribal population for industrial projects causes cultural, social and political damage to tribal populations that are very hard to repair."
Many locals are suspicious after past projects failed to adequately compensate landholders for their eviction, making it difficult for companies now to persuade them to relinquish land even with offers of compensation and employment. "The people in the state are upset about being underpaid in past industrial projects," said N.N. Sinha, Jharkhand's industries secretary.
While several industrial projects do offer jobs to one member of a tribal family, widespread illiteracy and lack of skills, other than farming, among tribal groups mean a small portion of them get jobs in factories. Most factory jobs are filled by nontribals living in small towns or larger villages, where education and skills training is more available.
Prafulla Samantara, secretary of the Lok Shakti Abhijan (Peoples Power Movement), which is protesting against steel projects being set up in Orissa, said, "People oppose land acquisition because they have seen what happens when people give up lands. They are starving and living on the street."
He said that tribals don't stand any chance of getting jobs in the new steel or other industrial projects being set up in the state. "How can the people benefit from industrialization, when they can't even read A,B,C,D?" he said.
Local governments also now get involved to vet terms, creating multiple layers of bureaucracy. "Since there were complaints of earlier deals undervaluing land, all matters related to land acquisition have to be approved by the district administration," said Tuhin K Mukherjee, executive director of JSW Steel Ltd., one of the India's largest steel companies. "Matters...often move back and forth in as many as 60 to 70 layers of bureaucracy."
A. M. R. Dalwai, secretary of Orissa's department of steel and mines, adding that apart from the challenge of persuading local landowners, environmental clearance for mega steel projects also takes time. He said private companies needed to step up efforts to persuade local landowners to give up their land for industrial projects.
Some projects are moving forward. Bhushan Steel, a midsize Indian company, is ready to begin commercial production of its five million tons a year plant in Orissa over the next few months, after acquiring land in Orissa in 2005.
Write to Prasenjit Bhattacharya at prasenjit.bhattacharya@dowjones.com and Sahil Mahtani at sahil.mahtani@dowjones.com
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