No Industrial Land? POSCO and ArcelorMittal pullout!

In a period when the Indian economy is believed to be reeling in uncharted waters of policy paralysis and scams, two pullouts by two of the largest steel producers in the world have generated additional shocks to the effort of bringing in FDI into the country. When the finance minister, P Chidambaram has been making rounds around the globe selling the India growth story, two steel giants, POSCO and ArcelorMittal have withdrawn their projects from the states of Karnataka and Odisha, respectively.

The POSCO project which was started in 2010 in Gadag, Karnataka and which was estimated at a total cost of Rs 32,000 crore spread over a land area of around 3,382 hectares was expected to generate around 6 million tonnes of steel per annum. The prime reason for the closure and subsequent withdrawal of the project has been cited as the unavailability of a captive iron ore mine. With mining scam occupying the headlines and even toppling the infamous government of the former BJP leader BS Yeddyurappa, getting hold of land in the mining belt is a precarious job for both the industry and the government.

In another instance, the mineral rich state of Odisha which has been in the news for almost 4 years now for a tussle between an industrial house, Vedanta, and the local tribal people over the bauxite ores in the Niyamgiri hills, suffered a jolt after the withdrawal of the world’s largest steel producer ArcelorMittal. The project started way back in the year 2006 in the mineral rich region of Keonjhar in western Odisha and was estimated to be worth Rs. 50,000 crore spanning over an area of 8,000 acres. The output expected from the plant was pegged at around 12 million tonnes per annum which was to be double in another 5 years time. The prime reason for the withdrawal by the steel giant headed by the Indian steel baron, Lakshmi Narayan Mittal, has been cited as the inability to acquire the required area of land and hence ensure captive iron ore security.

It would be worthwhile to recollect the Vedanta saga which has been going on in Odisha for almost half a decade now. Vedanta, the aluminium producing giant from London but at the helm of an Indian named Anil Agarwal, has been facing the music since the initial phases. It has an aluminium refining plant in Lanjigarh where raw bauxite is converted into alumina which is the raw material for aluminium. The bauxite ores are located in the hills of Niyamgiri which has been the house of century old tribes who have been protesting the establishment of the Vedanta industries. The factory in Lanjigarh has been occupying the news headlines ever since the Congress vice-president campaigned in the region supporting the tribals against the ruling BJD government. The entire saga of struggle and conflict was dramatized by the noted film maker, Prakash Jha, in his 2012 film Chakravyuh.

Local giants like Tata Steel has been voicing for a simpler land acquisition law as its sibling company, Tata Motors, had to face the issue in Singur, West Bengal and ultimately shift the famous Nano project from Bengal to Gujarat. The current status of the Land Acquisition Bill gives the government the control to take in huge areas of land, more so the agricultural land, at subsidized prices provided the acquisition will result in greater benefits to the nation, produce jobs and bring in development. On the contrary, the new bill proposed makes it the responsibility of the companies to buy land at their own risk and negotiate the price and also take care of the rehabilitation of the displaced. The industry has strongly criticized this section in the bill as they feel that acquiring fragmented pieces of land from different landowners will be extremely difficult to execute and is not something they are adept at due to the absence of certified land records and land holdings which is largely scattered.

Although the new proposed bill facilitates the process of attaching the valuations to the entire process of land acquisition, the  industry and the economic experts  feel differently. They opine that this could cause delays as new infrastructure needs to be set up thereby resulting in the increase in the total cost of the projects. The payment of compensation as proposed in the bill is estimated to be four times the current value in the market in rural areas and twice the present value in the market in urban areas. This compensation package is stated to be huge and is looked upon as  a possible debt in the balance sheets of all the major companies. The so called populist measure is also condemned as something which proposes to over compensate the land owners. The rehabilitation process as mentioned in the bill of all the displaced people is seen to be the measure hindrance and many industry experts feel that this particular clause could hurt the FDI in these sectors gravely.

It is evident that the government too does want to hurt the sentiments of the masses related to an issue like land which in a country like India has got sentimental attachments and possession of land is considered to be a matter of prestige. Hence, the call of the times is to provide adequate compensation and share of profits to the displaced people so that the industries too are not discouraged by the bureaucratic red tapes of land acquisition.