ICSI- Assignment 1

INVESTIGATING THE POSCO DEAL

About the POSCO Deal
POSCO India Private Limited (POSCO India), the Indian subsidiary of Korean
conglomerate POSCO signed a MoU with the state government of Odisha in June
2005 to construct a $12 billion-dollar steel plant at Paradeep. POSCO incorporated
POSCO India in August 2005 under Indias Companies Act, 1956. POSCO proposed
that the steel plant would generate an annual revenue of INR 7-8 billion for the
government of Odisha and would provide jobs to 108,000 people. The annual
capacity of the plant was proposed to the tunes of 12 million tons of steel.
The memorandum of understanding between POSCO and state government
states1,2:
a) Establishment of FINEX/BF plants in phases. With an investment $5.1 billion,
the first phase of the buildup would complete in two modules. The second
phase will also complete in two modules with an investment of $5 billion.
b) The total land that has been approved by the Odisha government is 6025
acres.
c) The government of Odisha has also agreed to provide all necessary
infrastructures like water, drainage, sewerage, electrical supplies and licenses
required to obtain coal, iron ore, highway road connection and rail networks.
d) POSCO India has agreed to conduct an Environment Impact Assessment (EIA)
and prepare a detailed EIA report and an Environmental management plan
(EMP).

Why was the deal important for Odisha and India?

The investment made by POSCO in Odisha would be the biggest FDI investment in
the history of Indian economy. According to the government of India, the deal would
make India self-reliant and globally competitive in the steel sector. The current
consumption of energy and carbon per ton of steel is 50% and 40% respectively
more than the industry standards. The deal would allow the steel industry of India to
achieve better efficiency and productivity. The most important aspect of the deal is
the economic impact which was estimated to be $2.5 billion.

Controversies
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The project was supposed to start after the deal was signed but remained placed on
hold due to strong protests by the residents. A year after the deal was signed, the
government of India passed a new law, The Scheduled Tribes and Other Traditional
Forest Dwellers (Recognition of Forest Rights) Act, 2006 2, which directly affected the
POSCO-India. The Act which is commonly known as The Forest Act granted certain
rights to the forest dwellers, including the use of forest resources and land. Activist
Mr. T.N. Godavaraman Thirumulpad filed a PIL against the Union of India, state of
Odisha and others claiming that the deal directly affects the forest dwellers of the
region. However, the Supreme Cout of India ruled the decision in favor of the Union
of India stating that any deal or MoU signed between two parties at an earlier point
of time and had been approved by the government and concerned departments can
not be changed. The court also stated that the area is eco-sensitive area. A balance
should be maintained to subserve the principle of Sustainable Development.

Controversy over land of 6000 acres

Land acquisition has been a problem for companies in India for a long time and the
same scenario was faced by POSCO and the state of Odisha. Many activists and
foresters claimed that the land is under use for cultivation purposes by the residents
for the past 75 years and hundreds of families would be affected by the deal. The
claim made by the government of Odisha that there are no forest dwellers in the
area raised serious doubts but failed to provide any response when the Union
Government asked for the details. Subsequently, the Government of India asked the
state government to meet all the 15 conditions listed under the Forest Act 2006
including the consent from the tribal families living on the land.

Social and Environmental Controversies

1. N. C. Saxena Committee: A 19-member committee was formed by the
Union Government and the committee publicly denounced about the noncompliance of the forest rights by Government of Odisha and violations of the
Forest Rights by agreeing to give land to POSCO. The Union Government
ordered that no further clearances should be given for any work on the
allocated land. In August 2010, the Union Government ordered to stop all
work going on the forest land under the non-compliance. The state

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government and POSCO complied with the order and stopped all the work
going on the disputed land.
2. Meena Gupta Committee: A 4-member committee, headed by Meena
Gupta, was later formed for further research and inquiry into the matter. The
committee examined various social, environmental and ecological issues and
presented a report to the Government of India in October 2010. The report
has the following main points:
a) The committee acknowledged that the Scheduled Tribes have an
important Constitutional status in India and moving them from their
land is altogether a different matter from displacing the other people.
b) It also claimed that POSCO India plant was initially planned near the
coastal area which has virtually no Scheduled Tribes families and the
families to be displaced are mostly agricultural and fishermen families
(about 700 families)2.
c) It also claimed that 21 names from voter list of 2006 belonged to
Scheduled Tribe protected by the Forests Rights Act of 2008.
After the MoU had been signed between the two parties, all the eight villages
protested the setting up of the plant. However, most of them changed their opinion
after the Meena Gupta Committee report. The only village that kept on protesting
was Dhinkia.
3. The Sanhati Group Finding: The Sanhati Group of West Bengal conducted
an independent research and fact-finding exercise. Some of the main findings
are:
a) The research includes a port at Jatadhahi Muhana where betel vine,
pisciculture and cashew nut cultivation is done. The project would
impact the livelihood of 400 families dependent on these sustainable
agriculture methods for their livelihood.3
b) According to an official report, only 438 acres out of 4000 acres is
private land. The rest of the land is used for grazing, firewood, farming
and even fishing. With the start of the project, these lands would not
be available for the local families. 4
c) The cultivation of betel vine is a primary source of revenue for the
locals during the Diwali season and it caters to the demand of North
and West India. This project would destroy this uniqueness of the area. 4

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d) The locals were very skeptical about the rehabilitation plan proposed
by the government and POSCO, as in the case of land acquisition for
IOCL.3
4. Protests in Delhi: A rally was organized in Delhi on 15 th November 2008 to
protest against POSCOs proposal. The main point raised in the rally was that
POSCO had been granted SEZ (Special Economic Zone) status and thus
POSCO will pay practically zero taxes for the huge profit they will make after
destroying a prosperous economy and a rich socio-cultural ethos. The project
would generate zero tax revenues, promising no benefit for any section of the
society or to the government and would utilize 15% of the natural resource of
the country and would result in huge air pollution, damage to the
environment and the wildlife.5

POSCO Stand
In October 2010, POSCO said in a press release that they had not violated any law
of the land and all the clearances required for the project are under regulations
defined by the government of India. All the environmental protection and corporate
governance matters were taken care of by POSCO. POSCO was highly affected by
the delays in the project due to continuous changes in laws and regulations from
2005 to 2010.

Government Stand
The government maintained a clear stand that they are in support of the deal. The
deal was important for Odisha and the Union government. The government knew
that the deal would have an enormous economic impact and Odisha, being one of
the most backward states in the country, needed this deal. The National Advisory
Council, headed by Sonia Gandhi, raised many questions about the agreement
made over the extraction of ore.

Environmental Impact?
The government at the center and the state government of Odisha was more
concerned about the impact that the deal would have on the economy of the state
and the country. The proposed plant would use 250 million liters of water which
would adversely affect the ground water table of the region. This step would highly
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affect the local families. The impact of the project on the environment and on the
lives of the people who are being displaced from their land was not studied and the
families living there, dependent on the betel vine cultivation would be huge. The
claims made by POSCO that the plant would be less polluting than any other plant
in India. However, all the claims were disputed from the start.

Aftermath of the Deal

There were many protests against the deal, both in Odisha and Delhi. Many famous
activists like Medha Patkar joined the campaign and questioned the various aspects
of the deal like the force acquisition of the land. The head of the PPSS, the group
protesting against the deal, was arrested and the campaign took a new height after
this incident. It has been 11 years since the MoU was signed between the
government of Odisha and POSCO but the project is at a standstill. As of now, the
deal is still on hold as the company does not have all the necessary regulatory
approvals. The company officials pointed out that they cannot proceed with the
project any further due to regulatory hurdles and they are yet to receive land and
forest clearance.6

Takeaways
India is a democratic country and it is the responsibility of the government to take
care of the people. The government has no right to forcibly acquire land from
individuals with the opinion that it is for the benefit of the people and the country in
the long term. Industrialization is necessary for the Indian economy but at what
cost? The government paid no attention to the lives of the people living in those
areas and gave away thousands of lands for free. Is this the government that we
chose for five years, with the belief that they will work for the people? MNCs are
coming to India with multi-billion dollar deals and playing with the lives of the
citizens. Should only the economic impact be necessary for signing the deal or the
environmental and social implications too play a major role?
All these questions remain unanswered in this deal. This deal is one of the examples
which is still hovering over the lives of the local families. There are numerous
examples where big MNCs have used their power and influence to get the deal and
then force the locals to move out of their way. With the coming of the law where the
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big corporations can donate as much money as they want to the political parties,
this paves a way to the senate or parliament where they can influence the decisions
of the government and propose policies which are in their favor. The government
should use every impact, be it economic, social or environmental, understand the
actual benefit the proposed deal would provide to the country and the citizens. The
rights of the people should be given priority over economic impact as a democracy
is made by the people living there not by some multinational company.

REFERENCES
1. http://www.orissa.gov.in/posco/POSCO-MoU.htm
2. http://en.wikipedia.org/wiki/POSCO_India#Social_and_environmental_controve
rsies_with_POSCO_India
3. The Sanhati Collective. (19th to 22nd April 2007). Fact-Finding Report on
POSCO Project in Jagatsinghpur, Orissa. The Sanhati Collective.
4. Bhattacharya, N. (n.d.). POSCO Destroys Rural Families of Jagatsinghpur.
Retrieved
January
07,
2012,
from
http://www.revolutionarydemocracy.org/rdv13n2/posco.htm
5. Google Groups Forum. Join the Protest March against POSCO Project - 15
November 2008 in Delhi.
6. Sanjai, P.R. and Pillay Amritha. $12 billion Odisha project: No end in sight for
Poscos woes. Retrieved April 11, 2016, from http://www.livemint.com

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