Archive for April, 2008

Orissa in India: An Economic Scam Brewing?

While the Government of Orissa (India) ostensibly fights opposition to the POSCO project from human rights activists and environmentalists, is there a gargantuan economic scam playing out?

The second statement in the Memorandum of Understanding (MoU) signed between POSCO and Orissa state government states:

“The Government of Orissa, desirous of utilizing its natural resources and rapidly industrializing the State, so as to bring prosperity and wellbeing to its people, has been making determined efforts to establish new industries in different locations. In this context, the Government of Orissa have been seeking to identify suitable promoters to establish new Integrated Steel Plants in view of the rich iron ore and coal deposits in the State.”

We must look at the impact of this economic venture on Orissa from a social and environmental perspective but most importantly from an economic perspective.

In the MoU, POSCO plans investment of approximately USD 12 Billion or Rs 48,000 crores. The numbers are awesome. Rs 48,000 crores could do much for a state that is faced with one of the poorest social and economic indices in the nation – in terms of literacy, health care, nutrition and mortality, earning power, etc. As part of Phase I, POSCO plans on setting up projects worth Rs 21,900 crores by 2012 and projects worth 21,500 crores as part of Phase II by 2016.

POSCO will set up an Indian subsidiary headquartered in Bhubaneswar for this effort based on 20-25 acres of land. In addition, POSCO will require 6000 acres of land for the steel project and associated facilities as well as for township development. In addition, other land may be acquired for infrastructure to transport goods between plants and to the port, for water treatment, etc.The Government of Orissa has undertaken to provide this land to the company.

In a show of good intentions, the MoU also notes that:

“The Government of Orissa appreciates that the Company will be a responsible corporate house with a high involvement in employees’ welfare and social development.”

The Oriya community is thus thrilled at the prospect of a major multinational investing in setting up the biggest iron and steel project in Orissa which will not only bring in an unheard amount of investment into the state but also provide for jobs and townships to help develop the people of the state. The Government of Orissa must be proud for having pulled this off.

And yet, there has been significant hue and cry on this deal. Environmentalist crying about a waterfall that could die – who cares about it when people are dying from starvation! Hills and scenic beauty will disappear – who cares if it provides stable livelihoods to a significant fraction or Orissa’s people. Even the discussion on the Ridley turtles seems ridiculous from this perspective. The people of Orissa seem justified in arguing that similar penalties were paid in the development of Maharashtra, Karnataka or other more developed parts of India or the world – so why complain now that we are doing the same. And that is a fair argument.

It is also fair to truly understand the details of this economic benefit that Government of Orissa believes will come to Orissa.

The Direct Economic Component

As part of the initial deal, POSCO has promised a flat rate of royalty at Rs 27/tonne of iron ore to the Government of Orissa (for ore with at least 62% iron content). This results in less than Rs 1620 crores to Government of Orissa over time of the contract of 600 Million Tonnes.

The current global market rate of iron ore is over USD100/tonne. In December 2007, the market was at USD 120/tonne. By this rate, 600 million tonnes of iron ore (that POSCO would mine) at greater than 62% iron content would result in Rs 240,000 crores. Wow! We suddenly realize that POSCO has effectively been given this ore free. Accounting for mining costs and the total investment package (less than 10% of the costs) the people and the state of Orissa are getting less than 1% of open market price of iron ore.

This is not a special deal for POSCO – similar (though smaller) deals are in the works with Tatas, Vedanta, Jindal, etc. Why is the Government of Orissa (and the Central Government) pursuing such deals? People in the business point to the strength of special interest groups and the mining lobby and that all political parties have received their dues from the lobby. Processes are encumbered with corruption – every truck load mined needs to pay the local MLA Rs 500 and a similar amount goes to the party coffers.

For all the excitement among the Oriya community, there have been few demanding accountability from Government of Orissa – why is the Government of Orissa is selling the ores at less than 1% of the global price. Surely, more money coming into the state coffer will be more helpful for people, will lead to more development?

After detailed analysis, some groups have demanded that the Government of Orissa set the royalty at 50% of market price, and that if the iron ore were to be converted to steel outside the state, the royalty be 80%. Even at this high a royalty, POSCO will be profitable. While Government of Orissa argued that this would allow other states to undercut Orissa and get a better deal, critics have suggested that these states form a coalition, like Organization of the Petroleum Exporting Countries (OPEC), to set prices. Such a coalition including the 5 states of Chattisgarh, Jharkhand, Orissa, Karnataka and Rajasthan is underway. Chief Ministers from these states met with the Prime Minister of India, on 19th of December and demanded a 20% royalty down from public demand of 50%. The Central Government of India haggled and is considering a royalty of 7.5-10%. The Government of Orissa seems too readily satisfied with this suggestion.

Such pressure does make the state respond. Now the state of Orissa will receive Rs 18,000 to 24,000 Crore in royalty (if this is made binding) as opposed to 1620 crores as per the earlier plan.

What reasons force these governments to undersell minerals at >90% below market prices? The state government has been very unwilling to provide details of the transactions, with the Government of Orissa initially claiming that disclosing such details of public funds went against confidentiality agreements (unless there are security threats, democratic governments globally have provided details of deals with private agencies). Why should Government of Orissa, with an annual budget of 4500 crores, let go 108,000 crores or 3600 crores per year for next 30 years and be satisfied with 600 crores/ year? (50% of 216,000 crores the price of 600 MT of Iron Ore at last year’s prices)

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@ Sandip Dasverma & Sanat Mohanty, The Seoul Times, Friday, 4 April, 2008

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Terrorism is not a Muslim Monopoly

“All Muslims may not be terrorists, but all terrorists are Muslims.” This comment , frequently heard after the Mumbai bomb blasts implies that terrorism is a Muslim specialty, if not a monopoly. The facts are very different.

First, there is nothing new about terrorism. In 1881, anarchists killed the Russian Tsar Alexander II and 21 bystanders. In 1901, anarchists killed US President McKinley as well as King Humbert I of Italy.

World War I started in 1914 when anarchists killed Archduke Ferdinand of Austria. These terrorist attacks were not Muslim. Terrorism is generally defined as the killing of civilians for political reasons.

Going by this definition, the British Raj referred to Bhagat Singh, Chandrashekhar Azad and many other Indian freedom fighters as terrorists. These were Hindu and Sikh rather than Muslim.

Guerrilla fighters from Mao Zedong to Ho Chi Minh and Fidel Castro killed civilians during their revolutionary campaigns. They too were called terrorists until they triumphed.

Nothing Muslim about them. In Palestine, after World War II, Jewish groups (the Haganah, Irgun and Stern Gang) fought for the creation of a Jewish state, bombing hotels and installations and killing civilians.

The British, who then governed Palestine, rightly called these Jewish groups terrorists. Many of these terrorists later became leaders of independent Israel — Moshe Dayan, Yitzhak Rabin, Menachem Begin, Ariel Sharon.

Ironically, these former terrorists then lambasted terrorism, applying this label only to Arabs fighting for the very same nationhood that the Jews had fought for earlier.

In Germany in 1968-92, the Baader-Meinhoff Gang killed dozens, including the head of Treuhand, the German privatisation agency. In Italy, the Red Brigades kidnapped and killed Aldo Moro, former prime minister.

The Japanese Red Army was an Asian version of this. Japan was also the home of Aum Shinrikyo, a Buddhist cult that tried to kill thousands in the Tokyo metro system using nerve gas in 1995.

In Europe, the Irish Republican Army has been a Catholic terrorist organisation for almost a century. Spain and France face a terrorist challenge from ETA, the Basque terrorist organisation.

Africa is ravaged by so much civil war and internal strife that few people even bother to check which groups can be labelled terrorist. They stretch across the continent.

Possibly the most notorious is the Lord’s Salvation Army in Uganda, a Christian outfit that uses children as warriors. In Sri Lanka, the Tamil Tigers have long constituted one of the most vicious and formidable terrorist groups in the world.

They were the first to train children as terrorists. They happen to be Hindus. Suicide bombing is widely associated with Muslim Palestinians and Iraqis, but the Tamil Tigers were the first to use this tactic on a large scale.

One such suicide bomber assassinated Rajiv Gandhi in 1991. In India, the militants in Kashmir are Muslim. But they are only one of several militant groups. The Punjab militants, led by Bhindranwale, were Sikhs.

The United Liberation Front of Assam is a Hindu terrorist group that targets Muslims rather than the other way round. Tripura has witnessed the rise and fall of several terrorist groups, and so have Bodo strongholds in Assam.

Christian Mizos mounted an insurrection for decades, and Christian Nagas are still heading militant groups. But most important of all are the Maoist terrorist groups that now exist in no less than 150 out of India’s 600 districts.

They have attacked police stations, and killed and razed entire villages that oppose them. These are secular terrorists (like the Baader Meinhof Gang or Red Brigades).

In terms of membership and area controlled, secular terrorists are far ahead of Muslim terrorists. In sum, terrorism is certainly not a Muslim monopoly.

There are or have been terrorist groups among Christians, Jews, Hindus, Sikhs, and even Buddhists. Secular terrorists (anarchists, Maoists) have been the biggest killers.

Why then is there such a widespread impression that most or all terrorist groups are Muslim? I see two reasons. First, the Indian elite keenly follows the western media, and the West feels under attack from Islamic groups.

Catholic Irish terrorists have killed far more people in Britain than Muslims, yet the subway bombings in London and Madrid are what Europeans remember today.

The Baader Meinhof Gang, IRA and Red Brigades no longer pose much of a threat, but after 9/11 Americans and Europeans fear that they could be hit anywhere anytime. So they focus attention on Islamic militancy.

They pay little notice to other forms of terrorism in Africa, Sri Lanka or India: these pose no threat to the West. Within India, Maoists pose a far greater threat than Muslim militants in 150 districts, one-third of India’s area.

But major cities feel threatened only by Muslim groups. So the national elite and media focus overwhelmingly on Muslim terrorism. The elite are hardly aware that this is an elite phenomenon.

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@ Swaminathan S Anklesaria Aiyar,The Times of India, 23 July 2006