If Ever There Was a Case of Biting the Hand That Feeds You

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A handful of Indian farmers in the state of Orissa are holding up a $12b investment by Korea’s POSCO, Pohang Iron and Steel Works, presumably for a high displacement payout but officially protesting at having their agricultural land used for industrial development.

Posco is apparently looking for some 4000 acres of land, of which 90% is government owned and a further 300 acres is agricultural. Posco officials say even these 300 acres are barely worked and though they cover 8 villages, 7 have already given their consent. Many in the State of Orissa have long held Maoist sympathies. Out of a population of some 32 million, 87% live in villages and one third of the rural population does not even own the land on which they work work. There have been several other small localized protests to industrial development in India that has led to bloodshed. In particular, two projects of the Tata Group last year in Orissa and West Bengal. Like this one, apparently agitated by outside sources with a political agenda.

The company has said without the land rights to mine for iron ore the steel mill is not viable and they will either shift to somewhere out of the state or more likely shelve the project altogether. For a country in desperate need of industrial investment and technology it would be a tragedy. Situations like this are often cited to illustrate the conflict developing countries have between protecting a way of life and raising living standards through growth. There is no doubt that those seeking political influence will use situations like this to gain a place at the table regardless of the welfare of their own people. However with so many farmers not actually owning the land on which they work, the compensation for many is non existent or woefully inadequate. This is rarely the fault of the multi national but rather one of the Indian government’s antiquated and bureaucratic legal system. If the government wants to encourage foreign investment they have to balance the needs of the few (via adequate compensation) for the benefit of the many that major investments like this bring.

Posco is not alone in looking at major developments in Orissa, home to over 25% of India’s iron ore reserves. Arcelor Mittal have also announced plans to invest $9b in a new steel mill as growth rates of 9% per annum for the last five years have encouraged both domestic and foreign producers to look at investments in the country.

Demand is likely to remain high if the government can honor promises to spend $500b on much needed infrastructure developments over the next five years. But with nearly all these projects held up at the land acquisition stage India is again being left behind by government failure while outside, the steel market booms.

–Stuart Burns

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