POSCO: Report by Mining Zone Peoples’ Solidarity Group and Commentary on Report

October 27, 2010

Click here to read Iron and Steal: The POSCO-India [PDF, English, 77 pages]. Prepared by the Mining Zone Peoples’ Solidarity Group (MZPSG).

A commentary on the MZPSG report:

The POSCO story: Corporate-state collusion and ongoing peoples’ struggle

By Amit Basole and Shiv Sethi, Sanhati


This article summarizes the recent findings of two reports on the proposed POSCO (Pohang Steel Company, an international steel conglomerate based in South Korea) project in Orissa—Mining Zone Peoples’ Solidarity Group (http://miningzone.org/) report and the report of Meena Gupta committee, appointed by the MoEF (Ministry of environment and forests). Hereafter the two reports will be referred to as the MZPSG report and the MoEF report, respectively.

The two reports reach similar conclusions with respect to the POSCO project but use different methodologies. For instance, the MZPSG report is unique in its analysis of the socio-economic impact of the POSCO project. Our main focus will be the MZPSG report. We shall highlight similarities and differences between the two reports at appropriate places in the article}. The project still awaits final legal clearance.

POSCO signed a memorandum of understanding (MoU) with the Orissa government in June 2005. Under the provisions of the MoU, POSCO is to set up steel plants with final production capacity of 12 million tons per annam (mta) in the iron-ore-rich region near Paradip, Jagatsinghpur District, Orissa. In addition the company will also undertake infrastructure development including a captive port and a captive power plant, integrated office space and residential township near the mining site and in the state capital Bhubaneswar, etc. The total investment is expected to be around 12 billion dollars over a period of 30 years. During this period the company will have exclusive access to iron ore not only for steel production but also for export to steel plants in South Korea.

The Orissa government is to provide the company with land for steel plants and iron ore mining, ensure availability of necessary ingredients like water, other infrastructure like roads, railways network etc., and help in getting necessary clearances from the relevant government bodies.

Since the signing of the MoU in 2005, the POSCO project has been touted as an ideal example of attracting much-needed Foreign Direct Investment (FDI) into India. According to the website of POSCO-india, a subsidiary of POSCO:

We believe that the Sustainable Competitive Advantages will be attained when the strengths of India and POSCO are combined. India’s huge growth potential, human resources, its open policy, and vast natural resources create an ideal environment for investment. We believe POSCO-India can effectively utilize these resources, in combination with POSCO’s experience for successfully constructing and operating 2 integrated steel plants in Korea, along with its advanced technology and solid financial structure.

Is the bargain quid pro quo? According to the two reports being summarized here, the answer is, no.

Displacement and loss of livelihood

The POSCO steel plant will acquire nearly 4000 acres of land; 75 percent of this land is forest land protected under the Forest Rights Act (FRA). This will directly affect 8 villages of three gram panchayats.

The MZPSG report estimates that the steel plant and the captive port alone will either displace or destroy the livelihood of nearly 50000 people. The report also attempts to gauge the impact of mining and other allied activities on the livelihood of the people in the region.

In contrast to the MoEF report, the MZPSG report takes a much broader view of the socio-ecological impact of the project. As the authors point out, those in support of and those in opposition to this project (or for that matter any project) couch their arguments in terms of the impact of a project on the local economy. This report attempts to measure this impact by carrying out a survey of the local economy of the affected areas in Jagatsinghpur and Kandhadhar.

In fact prior to the MZPSG report, there had been no serious attempt to gather information on the nature of the local economy either by the state or the central government. The only cost-benefit analysis on the issue, performed by the National Council of Applied Economic Research (NCAER) did not look into the local economy. The MZPSG report thus contains a brief description of the local economies in the three gram panchayats of Dhinkia, Nuagaon and Gada Kujanga and a preliminary survey of livelihoods in the Khandadhar mining area of Keonjhar and Sundergerh districts.

This data was obtained by researchers from the MZPSG by visiting nine villages of the area which is proposed to house the POSCO plant and port in coastal Jagatsinghpur district as well as the mining area in Keonjhar and Sudergarh districts of Orissa. The data was collected in July/August 2010. The team was able to carry out substantial discussions with betel vine cultivators, wage laborers, fisherfolk and pisciculturists (shrimp farmers).

Betel leaf (pan) cultivation is central to the local economy and is a financially remunerative occupation also providing employment to migrant from more interior districts. The research team found that even a small plot (1/20th of an acre) can yield an income of up to Rs. 15-17000 a month. This can be contrasted with the abysmally low incomes from agriculture prevailing in other parts of India. In addition to pan cultivation four of the six respondents in the focus group also cultivated some cashew for the market and rice for own consumption.

As expected from the high returns to cultivation, daily wages for farm labor on the betel-vine plots ranged from Rs. 150 to Rs. 240 per day, once again, far higher than typical wages for casual labor in the urban informal sector or agricultural labor in other rural areas (around Rs. 100-150 at most per day). When asked if they would consider working for POSCO once the plant had come up, the daily wage laborers (all of whom also owned at least some land) declined, citing reasons such as the adverse working conditions they anticipated, the potential power POSCO would derive from being the only major employment source in the region once other livelihood options were destroyed (“if we were unhappy with POSCO, where would we go”), and social support networks currently existing, which they anticipated would not exist in a POSCO employment regime. They also recognized that their own knowledge on the basis of which they could earn a decent livelihood right now, would not be respected under
the new regime.

“We will get jhadu safaye (cleaning) jobs … or chaprasi (peon or security personnel)… what else can we get? We don’t know how to operate the machines…”

The authors of the MZPSG report conclude that,

for those local to the three gram panchayats paan kheti employment was preferable to industrial employment, …they were able to find work regularly and at wage rates far higher than the Orissa minimum wage.

The pan cultivators are not the only ones at risk. Even though fisher folk have been peripheral to most discussions surrounding the impact of the project it is worth pointing out that the MZPSG report estimates the around 20,000 to 25,000 small fishermen operate in the area that would be lost to POSCO’S captive port.


Photo: A pan-kheti plot in Orissa (source: http://www.plantcultures.org/pccms/action/showItem?id=602)

The MZPSG report breaks with usual economic analyses of a local economy and offers some insights into the nature of the non-monetized economy. Living in close proximity to the forest, most of the people visited by the team in coastal Jagatsinghpur relied on forest produce for a complete diet. In fact since rice, the principal carbohydrate source was largely cultivated on rented plots for own consumption, only oil, salt, sugar
and occasionally lentils are regularly purchased form the market. A sample diet for a pan-cultivator is described thus. He “secures fish at least 2-3 times a week (except during the monsoons) from the local saline river. He also extracts or harvests a wide variety of fruits and vegetables such as bitter gourd, drum stick, drum stick leaves, potato, desi potato (a local variant that is much larger), squash, guava, mango and jackfruit from the nearby forest.” Thus, “If we were to factor in the monetary value of these products it would mean a substantial increase in…income.”

The report concludes that as much as 80% of local food intake is based on local forest produce or rice grown for own consumption.

Most reporting on the POSCO project has focused on the coastal area where the dedicated power plant, the steel plant and captive port are planned. However the mining zone which will supply the iron ore for the steel plant has received much less attention perhaps because no details are available on the exact region to be mined. The MZPSG report also takes a look at the livelihoods of the people in the Kandhadhar region (parts of Keonjhar and
Sundergarh districts) where mining is proposed and offers some comments on likely impacts. The population here is mainly composed of adivasis. In neighboring areas where iron ore mining is in full swing several instances of “self-evicted” adivasi village were found by the team. These villages had been abandoned because live was no longer possible here due to the mining. This phenomenon, which is perhaps not rare in other parts of the country, also indicates that the social footprint of such large projects is often not limited to the immediate area of operation only, but rather the local economy in a much larger region is profoundly affected, usually to the detriment of the local population.

Ecological damage and over-exploitation of scarce resources

The entire project consists of a captive port, a steel plant, a power plant, two townships, railway lines, highways, and an 86km-long water pipeline. The ecological impact needs to be assessed comprehensively for the entire project and not piecemeal as has been done while granting environmental clearances.

After the signing of the MoU in 2005, POSCO commissioned a rapid environment impact assessment (REIA) of the first stage of the steel plant (4 mta production) along with the captive power plant and the captive port. Based on these reports, they obtained the clearance from MoEF in July 2007.

Both the MoEF and the MZPSG reports question the validity of the REIA.

The reports note that all the different activities associated with the project – the construction and operation of the steel plant, mining for iron ore, building the port – will adversely affect various water bodies, result in massive deforestation, and threaten the existence of the rich flora and fauna in the area. Indigenous trees such as sal, piasal, mohu, etc. and rare species such as limbless lizards, double-nosed snakes, elephants, etc. (in forest areas), and the Olive Ridley marine turtles (in the port area) are in serious danger.

Concerns have also been raised regarding the site of the port which is very close to the publicly-owned Paradeep port (12 km away). In addition to the potential damage that could be caused to the Paradeep port due to the modified conditions resulting from the new port, the existence of two large port so close to each other in an ecological sensitive zone spells disaster. On the basis of studies carried out by the Ministry of Earth Sciences among others, the MZPSG report concludes that given the economic and environmental costs, it seems inadvisable to build a second port at just 12 kms. distance from an existing one (apart from the fact that the new port will cause a loss of revenue for the Paradeep Port Trust).

Further it points out that the Paradeep port could meet the needs of the POSCO project obviating the need for a second port. According to the MoEF report, Paradeep area is already a severely polluted area, bordering, according to a measure given by Comprehensive Environmental Pollution Index (CEPI), on a critically polluted industrial cluster. So any new industrial activity in the region could cause irreparable ecological damage.

The amount of water promised to the POSCO project is the highest allotted to any project in Orissa. There is mounting concern that usage on the intended scale will result in shortages for irrigation as well as drinking water use. The experiences of Coca Cola in Plachimada and Mehdiganj have already shown that poorly regulated industrial use can threaten the water supply of entire communities. The MoEF report notes:

The integrated steel plant has a huge water requirement. As per the Rapid EIA, the water requirement will be met from Jobra Barrage over the Mahanadi River by laying an 86 kilometer long pipeline. POSCO has already taken an approval from the Department of Water Resources, Government of Orissa, for withdrawal of 10 MGD water from the Jobra Barrage. The existing competing use of the water resources from the Jobra Barrage are drinking water for Cuttack and Bhubaneshwar cities, irrigation water for agriculture in four districts (Cuttack, Jagatsinghpur, Khurda and Kendrapada) and several industries, and these have not been taken into account. The public representatives who met the committee members expressed concern about the existing scarcity of water due to use by the already established industries. In fact, the Water Resources Department has allocated additional water from Hansua nalla for construction purposes which has not been disclosed in the EIA amounting to suppression of the information. The REIA has not addressed the widespread impact that will adversely affect a large population spread in a number of big towns as well as districts.

When the loss of forest cover, the resulting impact on adivasis, and the impact on public health due to mining are taken into account, an impressive range of outstanding ecological issues in need of resolution is illuminated.

The exaggerated claims of the NCAER report

The MZPSG report thoroughly examine the claims made by a NCAER study on the economic impact of the POSCO project in 2007; this study was partly financed by POSCO. The relevant numbers from this study have often been quoted by the Orissa government and the media to justify the POSCO project.

Tax revenues from the POSCO project

According to the NCAER study, over a period of 35 years, Rs 174,970 crores will accrue as tax revenue to the government from the POSCO project; Orissa’s share would be Rs. 77,870 crores. The MZPSG report notes multiple counts of irregularities in the computation of this number. One of the most glaring example is the computation of the total corporate tax over this period.

The NCAER study claims to show that the total corporate taxes would be higher if the POSCO project is accorded the Special Economic Zone (SEZ) status. However the tax rates are not only normally lower for SEZs, exports from the SEZs are not taxed at all. As the POSCO project is expected to export nearly 60% of its total production, the NCAER claim appears to be patently nonsensical.

Local employment generation

The POSCO project has been sold as the cure for all of Orissa’s employment ills. A poster issued by the company advertizes the following:

“The labour force in Orissa amounts to 153 lakhs. Among them 9.9 lakh are unemployed. Newly created 8.7 lakh jobs by POSCO-India project will drastically reduce unemployment rate.”

This figure of 8.7 lakh jobs is based on the NCAER study. The MZPSG report goes through the assumptions and oversights in method that ‘enabled’ NCAER to produce these figures. These include poorly explained methods by which the NCAER produces estimates for how many jobs would be created in other sectors (secondary job creation) as a result of the POSCO project. Further, there is deliberate confusion on whether the direct job creation is occurring over the relatively short-term period of five years (Phase One) or over a much longer period of 30 years (the time it will take for the plant to reach its full operating capacity). Contrary to the fantastical 8.7 lakh figure, the report concludes that the total number of jobs created by the project is more likely to be around 17000 over the first 5-10 years and up to 48000 over the following 10-30 years (these are also figures released by POSCO itself).

To these reduced figures is added the uncertainty introduced by barriers to labor mobility across sectors. As anticipated by one of the interviewed wage laborers, the higher paying jobs are likely to go to killed labor from outside while locals end up with ‘jhadu safayi’ jobs. Further undermining the rosy job-creation scenario is evidence on the labor-saving nature of technical change in the mining industry (Tables 7 and 8 in report) which
has resulted in falling direct employment per lakh rupees of output in the Indian mining sector in general.

But most egregiously, the NCAER study does not take adequate stock of the existing local economy described earlier and how many jobs would be lost there due to the project. The MZPSG report concludes that if we take into account the conservative estimate of over 50,000 people who will be affected by the project, and calculate the loss of employment across Orissa in different sectors, based on the inter-sectoral coefficients for betel vine, pisciculture, fishing and other agrarian outputs, it is hypothetically possible that the net gain in employment (due to the POSCO project) could be marginal, or even non-existent.


Perhaps the most egregious aspect of the POSCO project is the role played by the government to expedite its implementation.

Ever since the MOU was signed the project has faced stiff resistance from the people of the region. POSCO Pratirodh Sangram Samiti (PPSS) was formed in September 2005 to oppose the project. They blocked the entry of government and POSCO officials from the three gram panchayats affected by the project. This stand-off invited brutal back-lash from the government. The past five years have seen bouts of violence in an atmosphere of constant intimidation and fear created by the presence of police platoons in the affected areas. During this period there have been numerous attacks on the villagers by the police forces and others allegedly hired by POSCO, resulting in hundreds of injuries and one death in 2008. As late as May 2010, 25 police platoons deployed in the area attacked villagers, injuring at least 50 people. According to PPSS, the police have filed 152 cases against their activists and over 40 activists have been imprisoned.

The government has acted like corporate agents during this entire period.

One ‘procedural irregularity’ amounting to outright fraud is worth noting. This is the mockery of the ‘public hearing’ process that is needed to obtain environmental clearances. The MZPSG report describes it thus:

A joint public hearing for the captive port and the steel plant projects was held on April 15, 2007, at a high school in Kujanga Block which is nearly 20 kms. away from the project-affected Panchayats of Gada Kujanga, Dhinkia and Nuagaon. In the weeks leading up to the public hearing, the government deployed 12 platoons of paramilitary forces, which staged a flag-march in the area on 9 April…

Observers at the Public Hearing noted that POSCO company officials were seated on the stage along with government officials that were conducting the hearing. Not only is such an arrangement a direct violation of EIA guidelines regarding Public Hearings, it also offers us a symbolic as well as a literal representation of a state of affairs where the state has abandoned its role as a champion of public interest, but is instead actively promoting particular corporate interests.

As noted above, 75% of the land to be acquired for the steel plant is forest land, under the provisions of FRA. This land cannot be acquired without the express consent of the village level bodies (gram sabhas). The Orissa government not only failed miserably in obtaining this consent but resorted to falsification by issuing reports that no such claims were pending. The Saxena committee had earlier noted similar failings of the Orissa government.

In collusion with the local officials, POSCO also systematically falsified its field reports claiming that a house-to-house survey was carried out in 63 villages when in fact no survey or discussion of any kind were held in any of these villages.

The MoEF Committee, mandated to examine the legality of clearances already granted to the project, has recommended the revoking of all environmental, forest and coastal zone clearances. It is clear from both the reports that there has been flagrant violation of all due safeguards in place to protect both the local environment and the local people dependent upon it.

Thus both on procedural as well as substantive grounds the POSCO story is an egregious example of the State colluding with corporate interests in the teeth of local popular opposition.

If the corporate press is to be believed, the POSCO project is a god-send. They keep warning the ‘public’ that needless ‘bureaucratic delays’ will result in the loss of this lucrative investment. So one must ask what POSCO, the fifth largest steel company in the world with operations in over 50 countries, sees in Orissa. The MZPSG report provides an answer:

The extraction of iron ore alone allows POSCO to profit to the tune of Rs. 6,500 crores per year (about 1.5 billion U.S. dollars) for 30 years, ensuring that its entire investment of 12 billion U.S. dollars in this project is recouped within the first 8 years.

POSCO’s wait is tempered by windfall profits of the project. Will the peoples’ resistance continue to match POSCO’s persistence?

1 Comment »

One Response to “POSCO: Report by Mining Zone Peoples’ Solidarity Group and Commentary on Report”

  1. Amit Says:
    November 1st, 2010 at 12:50

    Marx said — The more a ruling class is able to assimilate the foremost minds of a ruled class , the more stable and dangerous becomes its rule.
    This so-called ‘opening up ‘ of our economy has created a divide between the professionally qualified middle class and the poor. It is sad to note the utter unconcern for the people of say, Kalinganagar affected by such projects . These people refuse to see that Manmohan & Co and their predecessors have made India a happy hunting ground for the super rich -be they Indian or the Foreign Capital.
    The silver line is the ‘Pratirodhies’ that have grown everywhere . It makes us take note of the courageous struggle by the so-called uneducated peasants .I believe that these struggles will in near future, open the eyes of the urban people who are not directly affected but who should be the natural ally of these struggles.
    Kalinganagar struggle is an important addition to the list probably started with Singur , Nandigram.

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