Will Resources-Rich Odisha Face Resource Crunch?

State Scan

June 29, 2013

BY SUDARSHAN CHHOTORAY

The growing inequality in Odisha’s mining districts is a cause of great concern. The proposed investment in steel has been over Rs 1,98,149 crore for producing around 76 million tonnes per annum (MTPA); power sector investments envisage producing just over 25,000 MW at an investment of around Rs 1 lakh crore, in the state. The Rs 3,812 crore investment in cement has been planned to produce roughly 5 MTPA.

In aluminium, the proposed investment is almost Rs 30,000 crore for 3.0 to 4.0 MTPA. Around Rs 20,000 crore has been planned for creating an SEZ in 4,000-5,000 hectares and Rs 15,000 crore has been proposed for private universities. Even an auto park is being contemplated to be set up by Amtek, the leader in global automotive components, which also wants to set up 2 MTPA steel plant and 500 MW power plants.

In fact, the power-plant proposed by the Anil Dhirubhai Ambani Group (ADAG) would be the world’s biggest coal-based one. It seems that Odisha would indeed become the “power house” of India, as was claimed by the prime minister and also Odisha’s chief minister.

Whereas exports of agriculture and forest products from the state fell by an average of around 20 per cent a year during 1993-94 to 2003-04, mineral and metallurgical exports went up annually by around 14 per cent to 17 per cent each. Even marine exports increased by an average 10 per cent per year. Odisha’s traditional handloom and handicrafts sector bore the brunt of the ‘industrialisation neglect’, with exports falling annually by an average rate of 26.6 per cent. The one possible silver lining in exports is Odisha’s growing importance as an IT hub, with its hardware and software exports increasing by a mammoth 65.9 per cent per year. During 2007-08 and 2008-09, its software and IT services went up by more than 39 per cent and is now ranked 10th in the country in terms of this export.

If the current growth in the exploitation amount is maintained, bauxite and coal reserves would last for around 50 years, but iron ore a paltry 20 years! Some were, however, more optimistic and estimated that, if all the existing MOUs were converted into projects the bauxite reserve would last around 50 years, coal 100 years, and iron ore 25 years. The 27.33 per cent growth in Odisha’s iron ore exploitation during 2002-03 to 2007-08 (which can be derived from figures given in various issues of Economic Survey of Odisha) is much higher than the 16.65 per cent growth in India’s production during 2003-08, which was itself the second highest in the world, next only to China.

Some other iron ore figures for India and Odisha may be equally of concern. Export of iron ore by Odisha during 2002-03 to 2007-08 went up by 29.11 per cent, more than the rate of increase in its exploitation. Among the countries of the world, production in 2007 as a percentage of the reserve base is the highest for India at 5.17 per cent, conspicuously above the second highest figure of 3.06 per cent for Brazil, while, in exports as a percentage of the reserve-base, it stands second, marginally behind Brazil, thanks to India’s low exports-to-production ratio. Now, even as per the Odisha government data, as of 3 November 2005, MOUs had been signed for standard and mega steel projects for production of 21.94 and 36.10 MTPA, respe
-ctively, at investments of Rs 28,570.18 crore and Rs 1,08,586.17 crore, respectively (Government of
Odisha 2005).

To appreciate the magnitude of this expansion, one merely needs to reckon that the 58.04 MTPA total additional capacity envisaged in these MOUs was around 1.26 times the state’s 2004-05 iron ore exploitation of 46 million tonnes (MT) and 78 per cent of its 2007-08 figure of 74.50 MT. Even industrialists like Naveen Jindal echo the earlier concern and believe that the “13-billion tonnes haematite ore available in the country would be exhausted in 20 years, going by the 10 per cent growth of the steel industry”. Concern by the Indian Bureau of Mines does not differ too much. “Again, if 43 steel projects who have signed MOUs with state government will start their production, then nearly 90 MT additional iron ore will be raised every year, and this will rise to 133 MT of iron ore raising. So also, it is expected that, if the iron ore raising continues at this rate, then in the next 25 to 30 years, the resources will be exhausted.” POSCO’s plan to export 400 MT of iron ore to its Korean subsidiary reflects its vested interests in investing in Odisha and vindicates the implications of dependency theory. Similarly, the motive behind the swapping of iron ore with high alumina content, amounting to 30 per cent of the annual requirement for the Paradeep plant, is suspect. POSCO will get a mining lease for 30 years and be assured of a supply of 600 MT (or 60 crore tonnes) iron ore to its Paradeep plant. Whereas the open market price of iron ore is Rs 2,000 per tonnes, POSCO incurs a cost of only
Rs 400 per tonnes, making a net saving of Rs 1,600 per tonnes, thus giving the company a gain of neat Rs 96,000 crore from just exporting 60 crore tonnes.

The sops that governments dish out to corporations to attract their investment do not end with low-priced raw material and cheap and excess land. But, these “concessions” do not always escape scrutiny. The Odisha High Court had pulled up Odisha’s IDCOL board for failing to protect the state’s interest by giving away Rs 20,000 crore in incentives to Jindal for exploration of Tangarapada mines . At a macro level, the RBI has sharply criticised Odisha’s SEZ policy for offering “to exempt all taxes, levies, stamp duties, registration charges, and electricity duty for 20 years for the industrial units coming up in the zones.” The proposed big industries are going to affect the environment quite badly as has been done by their predecessors in the state. For instance, some activists have filed objections to the iron ore mines of Neelachal Ispat Nigam, arguing that various reserve forests and protected forests fall within 10-km of the mining lease area and are a habitat to many “critically threatened species” like wild boar and hyena that are mentioned in Schedule I and Schedule II of the WLP Act, 1972. The Supreme Court Monitoring Committee on Hazardous Waste visited Odisha and chided the Odisha State Pollution Control Board for their callousness and nonchalance in implementing the order of the apex court on construction of the transport, storage and disposal facility of pollutants (including a hazardous waste incinerator). The committee also expressed its deep concern over the mushrooming of a large number of Integrated Steel and Sponge Iron Units in the State and urged the Odisha State Pollution Control Board to lay restraint on such indiscriminate and liberal grant of NOCs to these pollu-ting units.

Moreover, the gypsum, acid, and gas emanating from the IFFCO fertiliser plant in Paradeep have poisoned both water and environment in that area so much that more than 20,000 people from Kendrapada area, who were earlier depending on agriculture and fishing, have lost their livelihood, with some of them being forced to migrate to other states as bonded labourers. The districts like kendujhar and KBK are facing degradation in environment and destruction of their rich biodiversity.

It is now assumed that the market will weed out excess and inefficient capacity. However, key inputs like coal, gas, land and water are all allotted on the basis of non-market criteria, mostly with huge concessions and subsidies. These inputs involve critical common property resources and have significant externalities. A market based weeding out process will be littered with many incomplete projects which would have displaced people, impacted the environment and locked up huge amounts of financial resources, creating stranded assets of plant and transmission facilities. The costs of such weeding will be borne to a significant extent by the common people, the country and the environment. Thus, it would be a mistake to let the market play the arbitrator. Instead, it would be important to step in with purposive and deliberate interventions. The report therefore recommends an immediate moratorium on any further environmental clearance to new power plants. Further, it also recommends that from the 200,000 MW that have already been given the environmental clearance, projects with very high social and environmental impacts, projects that do not have broad local acceptance, and projects leading to sub-optimal use of transmission, fuel, land and water should be put on hold.

By Sudarshan Chhotoray from Bhubaneswar