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Corporate Jul 19, 2012

Industry in Odisha: Naveen grand on promise, low on delivery

By Sandeep Sahu

Bhubaneswar: Grand on promise, far too short on delivery. That sums up succinctly Odisha Chief Minister Naveen Patnaik's achievement on the industry front. It does not surprise though. His performance in other sectors stands in no great contrast to his 'achievement' here.

If signing MoUs were the mark of a progressive, industry-conscious leader, Naveen surely would be up there among the top ones in the country. Close to 95 MoUs in 12 years is no small deal. But the impression dips when one scrutinises how many of these have really taken off or even close to it-around 30-and the number of big ticket projects stuck in various disputes. Add to that a power sector in total mess. Clearly, the chief minister has not done enough.

Odisha figures fairly high in the country's pecking order as an investment destination, both domestic and foreign. At the last count it had promised investment of Rs 14 lakh crore for both MoU and non-MoU projects. And there is nothing to suggest that interest in the state is going to wane in the near future.

Failing to deliver. Image courtesy PIB

But these enviable figures gloss over the fact that all this investment is coming to Odisha not because of the investor friendly nature of the dispensation here, but because the state has the minerals. For those not in the know, it is home to about 33 percent of the iron ore reserves, 55 percent of bauxite, 25 percent of coal, 40 percent of manganese and 95 percent of chromite in the country. Since the 2001 Industrial Policy lays down that mining leases will be given only to those companies which set up shop here, industrial houses had little choice but to sign an MoU with the state government to start a plant here to lay their hands on the minerals.

No wonder, the lion's share of the investment was in the metallurgical and power sectors. Out of total 95 MoUs inked, 53 are in the steel and aluminium sector while 29 are for setting up of power plants with a combined envisaged generation capacity of 37,000 MW.

The progress (actually the absence of it) of the much touted 'biggest single FDI investment in the country' is a fairly dependable barometer of the commitment to industrialisation and the investor-friendly nature of the Naveen Patnaik dispensation. A full seven years after it signed the MoU with the South Korean steel major Posco for setting up of a port based mega 12, 000 million tonnes per annum (MTPA) steel plant near Paradip in Jagatsinghpur district and two full years after the MoU expired, it is still grappling with the draft of a revised MoU.

After having moved heaven and earth in the run up to the signing of the MoU and sometime after that to see the project through, the Naveen government suddenly appears to have lost interest. Wisened by the state government's apathy, the company is now talking about a much truncated steel plant (8 MTPA) on a much truncated piece of land (2,700 acres) than it had originally asked for (4,004 acres). The state government has so far managed to acquire just about 2,000 acres, still 700 acres short of even this downscaled requirement.

Land acquisition has proved to be the Achilles' heel for the chief minister even in the other two big ticket investment proposals in the state - Laxmi Mittal's Rs 40, 000 crore 12 MTPA steel plant at Patana in Keonjhar district and Vedanta's 6 MTPA aluminium plant split into the refinery at Lanjigarh in Kalahandi district and the 0.5 MTPA smelter at Jharsuguda. While the Mittal plant in Keonjhar has been all but shelved because of problems in land acquisition, Vedanta's bauxite mining plans in the Niyamgiri hills - considered sacred by the Dongria Kondhs who inhabit it - has run into rough weather first with the Central Empowered Committee (CEC) on environment of the Supreme Court, then the Union Ministry of Environment and now the National Green Tribunal (NGT). If it does not ultimately get the mining rights, the entire project is doomed.

Projects in the highly lucrative aluminium sector, in particular, have had a particularly difficult time in the state as exemplified by the fact that the 1.5 MTPA Utkal Alumina project in Kashipur in Rayagada district has now been stalled for more than 12 years-longer than Naveen Patnaik has been chief minister for-on accounts of problems related to-what else-land acquisition.

The state that was the first in the country to reform the power sector-way back in 1996-and has drawn investment worth Rs 1.35 lakh crore for thermal power plants in the last seven years has just weathered one of the worst summers in recent memory as far as power supply is concerned. So much for the claim of being a power surplus state!

For all the talk of building Kalinganagar as the 'steel hub' of the country with a cumulative production capacity of 40 MTPA of steel, all that the government has to show for it efforts is a 'billet' making unit in the shape of Nilachal Ispat Nigam Limited (NINL), a public sector unit. Six and a half years after 13 tribals were killed in police firing in Kalinganagar while protesting against the construction of the boundary wall of the six MTPA steel plant proposed to be built by Tata Steel, the plant is still to get off the ground.

The Kalinganagar police firing on 2 January 2006, had two distinct fall-outs. First, the nationwide-and even international-outrage over the police high-handedness made the Naveen government wary of using excessive force to acquire land. Second, it emboldened those set to lose their land-from Sundargarh in the north to Rayagada in the south-due to mining or industrial projects to resist acquisition. All the shouting from the rooftops by the government that it has the best Resettlement and Rehabilitation (R & R) policy in the country has failed to persuade the people to part with their land.

Naveen government's industrialisation plans from the very start were almost entirely dependent on large scale extraction and exploitation of the state's mineral resources which incidentally are located in the tribal heartland. With Maoists, green activists and radical rights groups hyperactive in this region, any attempt to ride roughshod over issues of mining lease or displacement could foment a rebellion of sorts among the tribal people who account for a whopping 24% of the state's population.

Why didn't the government consider the potential trouble areas before rushing into signing the MoUs?

The Odisha mining scam that has been rocking the state for over two years now has also put the government on the defensive. Forget being aggressive, it is unwilling to extend even the minimum help that investors were promised in the MoUs lest it is seen as scandalous and evidence of some "unholy nexus" with the big ticket investors!

With assembly elections due in the next two years, one can hardly expect to see Naveen government going overboard with land acquisition for industrial projects.


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