Forbes India 15th Anniversary Special

Can Posco Cross the India Barrier?

The $12 billion Posco investment in India was supposed to be the biggest FDI project in the country. After six years that still remains on paper

Published: Aug 10, 2011 06:19:07 AM IST
Updated: Aug 10, 2011 12:14:39 PM IST
A LONG WALK HOME Women and children from Dhinkia return from a rally to prevent the police from taking down betel vines, their main source of livelihood. Most of the betel vines grow on the 2,900 acres of forest land that the Posco project will take over
Image: Goutam Roy for Forbes India
A LONG WALK HOME Women and children from Dhinkia return from a rally to prevent the police from taking down betel vines, their main source of livelihood. Most of the betel vines grow on the 2,900 acres of forest land that the Posco project will take over

Horangineun jugeumyeon gajugeul namgigo,
Sarameun jugeumyun ireumeul namginda
(When tigers die, they leave behind leather.
When people die, they leave their names behind)
—Old Korean Proverb

The news flash from Press Trust of India came on July 10, 2011. Posco, the $32 billion South Korean steel giant had decided to get some local help in Karnataka. It roped in two Indian companies, Bangalore’s Hothur Group and Goa’s Salgaonkar Mines, to get clearances and acquire land for the mines allotted to it for the proposed steel plant in the state, the news report said. I was incredulous. Posco is a fiercely secretive company and a lone ranger. Surely it would never share a project! Phone calls would have to be made.

The trail naturally led to Orissa where Posco has been under siege for the past six years from natives who want it to leave, but the government wants it to stay. The buzz in Bhubaneswar, the state capital, queers the pitch even more. Bureaucrats are saying that Posco is willing to give up a few chips. They say Posco has agreed to give away its right to ‘swap’ up to 30 percent of the ore from its mines in the state.

Because of the high alumina content in the local ore, Posco had in the 2005 memorandum of understanding (MoU) got permission to export up to 30 percent of the ore and replace it with an equal amount of imported ore. The Indian steel industry was already miffed that Posco was getting precious raw material when none of them, other than Tata Steel and SAIL, have captive mines. What riled them more was that, at a time when the focus was on conserving natural resources and value-add locally, Posco was being allowed to export iron ore, possibly to South Korea.

There are more surprises from the company that had its first managing director for its Indian operations working out of Seoul. Posco is in the process of roping in an Indian steel veteran to head its Orissa operations. Sources add that in all probability, even its Karnataka steel project would be headed by an Indian.

The South Koreans are finally giving some ground: Taking on local partners; giving up on a clause in the MoU that was one of the main reasons for it to come to India; and getting Indians to head its operations. For Gee Woong Sung, managing director, Posco-India, this must be a humbling moment. It shows that Posco is finally beginning to figure out India. This is a country where industrialisation has never had unequivocal acceptance. It is not clear whether Sung has ever visited Bokaro Steel City, one of the oldest steel towns of India. If he hasn’t, he should.

The setting sun has just broken through dark clouds over Gadakujang, a village in Orissa’s Jagatsinghpur district. The coconut and palm trees are bathed in a russet glow that contrasts beautifully against green paddy fields. I wish there was a drizzle to create a rainbow. Just like during my childhood in Bokaro Steel City. I would rush to the rooftop of our house to check if there was a rainbow arching over the giant red-and-white chimney of the hot strip mill, part of the steel plant owned by Steel Authority of India. The chimneys were the tallest things I had ever seen.

Like Gadakujang, parts of which will give way to Posco’s steel plant, many farming villages inhabited mostly by tribals had made way for Bokaro. Close proximity to coal and iron ore had made it an ideal site for India’s fourth steel plant. The plant was only half built when in 1968 my father, the first engineer from the family, left our native Kerala and came to Bokaro. Over the next 30 years, ‘Thomas contractor’, as my father was called, would compete with his fellow Madrasi and Bihari contractors to get orders from SAIL. At home, our life was regulated by the steel plant’s sirens that would go off thrice a day — in the morning, afternoon and evening. It was our family clock.

I call my father. My parents left Bokaro in 1997 for their hometown in Kerala where they have been ‘settled’ since then. I want to ask him how things were in Bokaro when he first went there. Were there protests by those displaced by the steel plant? What kind of work did the locals get in the plant?
Though most of the land where the steel plant came up was unused, there were a few villages that were displaced. The natives, mostly tribals, got jobs in the new plant and compensation for the land. But apparently it was not enough and was contested. A Business Standard report, dated May 21, 2007, says that the Jharkhand High Court has directed SAIL to pay compensation to those displaced 47 years after they were first asked to move!

Work for the natives was mostly unskilled or khallaasi jobs. “But they were hard workers,” recollects my father. “Much more efficient than the South Indians or Biharis. And give them an extra Rs. 10 for haandiya [local rice beer] and they would become your most loyal employees,” he adds with a laugh.

By 1997, many of the tribals had got trained on the job and went on to get semi-skilled jobs. While few became engineers or officers at SAIL, some did become ‘contractors’, including Munda, my father’s close associate. Munda started as a welder and went on to become a contractor. He even bought our old Fiat Padmini when we left Bokaro.

Largely though, the natives had become a minority in their own homeland. Both in the city and in the steel plant, ‘migrants’, especially from South India, neighbouring West Bengal and other parts of Bihar, had taken over. That same year, in 1997, Bihar was divided into two states and Bokaro Steel City became a district in Jharkhand. Through my college years I would boast of Bokaro as an oasis of development with broad roads, planned colonies and famous schools.

Rajkishore Dalvi isn’t concerned about broad roads, planned colonies or famous schools.

“In the mornings we can go anywhere into the fields and defecate. When the plant comes, we might have to pay Rs. 5 to shit!” he says.


Dalvi and Asis Mohapatra hail from Gadakujang. They  are in their 20s and work as security guards with Posco’s contractor. The job is only for a month and the two are confused about what they will do beyond that. Both are graduates and don’t want to work in the steel plant. “What kind of job can I get? Posco has given me no training and I don’t want to work as a coolie or a mason,” says Dalvi. The two friends are also concerned about the sociological change that will be forced upon their village. “Once the plant comes, people from other places will come and rule over us. They will seduce our sisters and daughters. What will happen to us… what about our way of life?”

The tractors hoot, drowning out the youngsters’ voices. Loaded with mud, scores of them are lining up. Excavators unload the mud on the paddy fields. Posco plans to build a rehabilitation colony on this ‘reclaimed land’ for families who would be displaced by its 12-million-tonnes-a-year steel plant.

Here is the irony. Both Dalvi and Mohapatra are supposed to guard this work, but they nurse a grudge. Dalvi’s family sold its paddy fields four years ago to a man who claimed he wanted to set up an aqua culture industry. His family and others sold nearly 25 acres for Rs. 75 lakh. Later rumour spread in the village that the man was Posco’s middleman. To their bewilderment, today the two are supposed to make sure work on the plant goes on unhindered.

“Can you stop the steel plant from coming up?” This was the first question that Mohapatra and Dalvi had asked me. Now I understand why.

Does Naveen Patnaik, Orissa’s chief minister, understand this? If he doesn’t, I understand that as well.

Now in his third term, the Orissa chief minister didn’t even need the support of his old ally, the BJP to win the elections in 2009. His clean, corruption-free image continues to connect with the masses and his push for development has found takers among the middle-class.

Patnaik was happy that Orissa had bagged India’s largest FDI through the Posco project in 2005. It would help Orissa’s economic well being.

In Orissa, poverty in health and income has gone hand in hand with wealth in minerals. The state has 60 percent of India’s bauxite reserves, 25 percent of coal, 28 percent of iron ore, 92 percent of nickel and 28 percent of manganese reserves. But unemployment, at more than 8 percent, is among the highest. With Orissa’s tribals accounting for more than a fifth of its population, the highest proportion for any state, the route to industrialisation often cuts through the mineral-rich lands inhabited by the tribals.

This became clear at the Tata Steel project site in Kalinganagar. Thirteen agitating villagers were killed in a police firing on January 2, 2006. Patnaik has since been cautious of not forcing his development agenda on the people. While the stance was right, what has now worsened the pitch is the ongoing debate within his BJD party on the future of the Posco project. Political circles in Bhubaneswar are heavy with rumours that Pyaremohan Mohapatra, the former bureaucrat who worked extensively with Naveen Patnaik’s father Biju Patnaik and now sets the son’s agenda, has second thoughts on the viability of the project planned by Posco. The party doesn’t want Jagatsinghpur to do to them what Singur did to the Left government in West Bengal.

The quandary is now evident in the state government’s year-long negotiation with Posco over the renewal of the 2005 MoU. Patnaik wants Posco to compromise on the initial agreement. In 2005 itself, experts had panned him for letting Posco get away with the iron ore export clause. And now he has to play a very delicate balancing game to save his prized project while cementing his position among party colleagues and the masses. 

The problem is, Posco isn’t the sort of company you play delicate balancing games with.

Posco is the only major steel company in the Dow Jones Sustainability Indexes, which track the performance of leading companies deemed to operate in a socially responsible manner. Posco’s history and legacy is intertwined with that of its home city Pohang in South Korea. A small fishing town till the 1960s, Pohang developed after Posco was set up, its population growing from 50,000 to more than 500,000 now. Its per capita income is more than 10 percent higher than the national average. What has also helped establish Posco in the common man’s life is the Pohang University of Science and Technology, set up with financial assistance from Posco. It was voted the best science and technology university in Asia by Asiaweek in 1998.

South Korea had a lower per capita income than India in the 1960s and was ravaged by years of Japanese occupation followed by conflicts with North Korea. It was General Park Chung-hee, who came to power in a 1961 coup, who set up Posco as the backbone for the country’s shipbuilding and auto industries.

But Posco’s future may not be equally rosy. From being the largest steelmaker in the world in the 1990s, the company has seen L.N. Mittal and Chinese rivals chipping away at its glory. China’s Baosteel has now dethroned it from the top three. Its iron ore mines take care of only 20 percent of its needs and demand for steel in its home market is not growing as fast as it would have liked.

Image: Goutam Roy for Forbes India

Tata Steel: On Track
  • Signed MoU on November 17, 2004, for setting up 6 mtpa steel plant
  • Part of Kalinganagar industrial hub conceptualised by Biju Patnaik, father of the present CM
  • Needs 3,471 acres; government has acquired close to 3,000 acres
  • Will be allocated an iron ore mine on completion of 25 percent of the project work
  • Almost 950 families of the total 1,195 who would be displaced have been rehabilitated
The $12 billion investment in Orissa is part of its bigger $30 billion drive to find emerging markets and profit centres. More than anywhere else, the Indian projects in Orissa and Karnataka, which it added last year, would be crucial thanks to the huge reserves of iron ore and the country’s growing steel market, the second fastest growing in the world.

In South Korea, there were hardly any protests when the two steel plants were set up in Pohang and Gwangyang. Almost 70,000 people were displaced in Pohang alone, but General Park Chung-hee convinced the people that the steel plant was for the national good. In Orissa, only about 2,000 people were to be displaced and Posco expected the first phase with annual capacity of 4 million tonnes to be up and running by 2011. Unfortunately, it misread the ground realities and failed to rope in local partners.

The military culture is still at the heart of the way Posco officials think, accepts a senior official of Posco-India. “It is a top down approach. Commands and suggestions coming from the main offices in Bhubaneswar and Delhi and executives at the site in Jagatsinghpur executing them,” adds
the official.

This hampered decision making on the ground where conditions were dynamic. Says an official from Industrial Infrastructure Development Corporation (IDCO), the state agency that acquires land on the government’s behalf before passing it on to companies: “From taking media delegation to sites or passing budget for as small a job as digging somewhere in the site — for everything, first permission has to be taken from the head office. This affects implementation.”

The official, who is now part of the state machinery acquiring land in villages around Dhinkia, points to another chink in Posco’s armour. “They don’t have any asset on the ground to show their presence. We have been asking Posco to set up health clinics, schools and other amenities so that the local people get to know the company. But there has been no response.”

Dhinkia, which is a 15-minute drive from Gadakujang, is the cradle of the anti-Posco protests. It is doubtful if people here will accept even a handshake from a Posco official, forget a hospital.

The scene at the entrance to the village is not as dramatic as the last time I visited in 2009. Then the whole village was barricaded by men, women and children armed with bamboo sticks, preventing officials from Posco and the government from entering. The streets are almost empty this time. But as the car comes to a halt, a few men appear.

In 2007, Posco-India’s Sung, then a senior executive, was a common visitor in these parts. The then 48-year-old would visit houses, pay homage at the temple and talk to farmers, chewing betel leaf with them. Sung could see that farmers were warming up to the idea of the project and he was
optimistic about its future.

Around the same area, another 48-year-old was also making his rounds. Abhay Sahoo, now an emerging communist leader, knew there was resentment in some parts of the village against the project. It only needed a spark to ignite it.

It came on May 11, 2007. Three Posco officials were kidnapped in Gobindpur. One was released immediately, two were grilled by anti-Posco protestors under the banner of Posco Pratirodh Sangram Samiti (PPSS) for 10 hours before being let off. Things came to a head in October when, in a span of three days, PPSS activists took 13 Posco officials captive, including South Korean nationals who were trying to enter Dhinkia. For the next three years, Dhinkia (more than half of the over 400 acres of private land and 2,900 acres of forest land needed for the project is here), was barricaded by villagers.

Since then, it has been downhill for Posco. Though the barricades have come down, no company official dares enter the village. If earlier Posco brought doctors from South Korea to treat children in Jagatsinghpur, arranged relief camps during floods and opened training institutes for the youth, now it completely shut shop. “First give us land and then we will do something,” became the company’s refrain. With no clinic or school to show on the ground, it lost connect with the likes of Rajkishore Dalvi and Asis Mohapatra. Even if the land grabber who bought the 25 acres in Gadakujang was not a Posco man, nothing was done to dispel the rumour.


IN GOOD CHEER Haandiya (local wine) market in Kalinganagar, close to the Tata site. The general state of cheer among local folk here is in stark contrast to the mood among people affected by Posco’s project
Image: Goutam Roy for Forbes India
IN GOOD CHEER Haandiya (local wine) market in Kalinganagar, close to the Tata site. The general state of cheer among local folk here is in stark contrast to the mood among people affected by Posco’s project

What Tata Steel did Right

  • Changed stance from “This is government’s job” to “This is our project. We need to make the initiatives”.
  • Studied the local culture, realised women play a central role in tribal families. Launched ‘engagement’ programme with women at the centre.
  • Created assets on the ground — rehabilitation colony, training centre and hospital — to connect with people.
  • Increased compensation, more than required by government guidelines.
  • Persisted despite initial setbacks and resistance. That helped them breakthrough.
  • Used its experience of working in Orissa (for almost a century because of its iron ore mines) and engaged local administration and village leaders.
I enquire about Abhay Sahoo, the leader of the anti-Posco protests. “He has gone to the rally,” answers Alok Swain. Before I complete a question on the protests, he is ready with an answer: “We will not give our land to Posco. The betel vine cultivation is doing well. We earn at least Rs. 5,000 and up to Rs. 50,000 a month.” Looking around I don’t find much change in the village. Houses are mostly thatched. Like before, there is no electricity and the post office has remained closed for a few years now. “The government is isolating us. All other villages have electricity but we don’t have. Without the post office we depend on mobile phones to be in touch with relatives,” laments Swain.

Ever since Posco announced the project in 2005, Dhinkia has remained the focal point of protests. To ease the situation, the state administration recently announced that Posco doesn’t need the private land owned by Dhinkia villagers but will manage with just the forest land. That has not cut ice with the villagers.

A 15-minute walk later, we reach an open area where a crowd has assembled. This is the latest battlefront, from where police had tried to dismantle betel vines a few weeks earlier. A large number of women and children sit in a line, with men hovering around with a constant supply of water and biscuits. A crew of local media surrounds Sahoo, who has just met a delegation from National Commission for Protection of Child Rights. The delegation is investigating the use of children by anti-Posco protestors as human barricades against police.

Regardless of the controversies surrounding him and his means, Sahoo has managed to become the face of the anti-Posco movement. Credited with keeping the red flag flying even as the communist parties suffered electoral defeats in West Bengal and Kerala, Sahoo gets a constant parade of leaders like A.B. Bardhan, activists like Medha Patkar, journalists and academicians like Asit Das, a research fellow at Delhi’s Centre for the Study of Developing Societies. “Labourers working in mines, who come from surrounding villages, get a daily wage of Rs. 300 and two meals. Where else in India have you heard of such rates?” asks Das.

Das tells me something that could be central to the protests in Dhinkia. “Eighty percent of people in Dhinkia don’t have their own land. All are dependent on the forest land where they grow betel vine. So there is no point in the government or Posco saying they don’t want private land in Dhinkia.” In other words, compensation for the forest land, now at Rs. 11,000 per decimal (one decimal is 1/100th of an acre), needs to go up. Land around the project site is today valued at Rs. 20 lakh per acre. Only the privileged own land. Most of the villagers cultivate betel vine over 10 decimals of land. This means a compensation of Rs. 11 lakh, which pro-Posco leader Tamil Pradhan agrees may not be enough to swing opinion in favour of the proposed mega steel plant.

Pradhan sits in the neighbouring village of Nuagaon. A leader of the pro-Posco group United Action Committee, he alleges Sahoo is using goons to drum up support and silence opposition. “Sahoo drove away 52 families from the neighbouring Patana village as they were not supporting him,” he alleges. Sahoo doesn’t deny the charge. “How can they support a multinational company?” he asks with arched eyebrows and wide eyes. He proudly says he has 48 cases lodged against him and is waiting for two more to make it a full 50, much to the delight of his supporters who burst into laughter.

“People say you get money from Posco’s corporate rivals,” I ask him. “I don’t get money from any company. But I do have my friends and advisors who back me. Why should they bother from where I get money? Do you know, in this village I have a room full of biscuits supplied by my supporters!”
Villagers don’t give ear to rumours that Sahoo and his relatives have become big landlords. They also don’t care that his elder son works in Bhushan Steel, whose project has also seen protests in Orissa. They don’t care because they have been convinced by Sahoo that the development that the steel plant brings is not for them but for the foreigners. If only Posco had changed its tack like Tata Steel in Kalinganagar.

Today Sahoo’s star is on the ascendant. A few years ago Rabindra Jarika was waging a similar battle against Tata Steel at Kalinganagar (see Forbes India issue dated July 3, 2009). Posco could look at what Tata Steel has done and Sahoo should look at Jarika.

Jarika is today without his soldiers. A teacher, Jarika had become the voice of protestors after the police firing in 2006 had killed 13 tribals in Kalinganagar, the industrial hub where Tata Steel planned a steel plant. Today he is resigned to the fact that Tata Steel’s plant is set to come up. India’s oldest steelmaker has been able to convince 950 of the total 1,195 families to part with their land and shift to the rehabilitation colony.

Chandiya, Jarika’s village, is yet to shift to the rehabilitation colony but there is little sign of resistance. A weekly market is on and there is a festive feel as glasses filled with haandiya are passed around. Just a 10-minute drive away, work is on full swing at the Tata Steel plant site.

Tata Steel didn’t lose hope when the 2006 shooting polarised opinion against its plant. Instead, it kept pushing the state government to get on with land acquisition and got its officials to engage with local people to change their perception of the company. It announced a scheme called Tata Steel Parivar and formed six teams to look at rehabilitation, community development and training to increase employability of youngsters. It realised that women play a central role in a tribal family. Thus, self help groups were formed among women engaged in activities like poultry rearing and tailoring. Compensation for land increased to Rs. 4 lakh per acre from less than Rs. 1 lakh earlier. A hospital in the rehabilitation colony came up last year.

Tata Steel says it spends Rs. 25 crore every year in developing the local community around Kalinganagar. But more than the money, it has been the company’s persistence to win over the people that will enable it to start producing steel  there by 2014.

Recent initiatives show that Posco is learning from its mistakes in India. The company has reached out to senior executives from the local steel industry, including a former veteran of Jindal Stainless with considerable experience in setting up projects in Orissa, to head its India operations. One of the options is to have two separate Indian nationals to head the Orissa and Karnataka projects. The two though might still report to a South Korean managing director of Posco-India.

(This story appears in the 12 August, 2011 issue of Forbes India. To visit our Archives, click here.)

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  • Abraham Kurien

    a lucidly written, evocative article that puts the posco muddle in proper prspective. wish the central and state governments could put their acts together and provide the healing touch, protecting the vulnerabilities of the poor tribals as well as preserving the environment, therby preventing a major set back to development in the backward area.

    on Aug 12, 2011