THE BLOG
01/28/2014 11:50 am ET | Updated Mar 30, 2014

Villagers Stall India's Largest FDI for 8 Years

Citing "serious human rights concerns, " last fall a panel of eight United Nations experts called for an immediate halt to a $12 billion iron-and-steel complex being built in Odisha, India by the South Korean metals giant POSCO. In January, however, India's environment minister granted clearance to the steel plant -- simultaneously unrolling a red carpet for the visiting South Korean president and giving a green signal to foreign investors anxious about delays in realizing profits. "I am happy that the large-scale POSCO steel project in Odisha is set to be operational in the coming weeks," announced Prime Minister Manmohan Singh.

For eight years the inhabitants of several coastal villages in the state of Odisha, whose fields and vines enable a flourishing economy, have been resisting eviction to make way for POSCO's steel plant and an associated port. In retaliation, "police have barricaded villages, occupied schools, leveled thousands of fabricated criminal charges against individuals opposing the project, and have refused to protect individuals from consistent attacks by private actors who are allegedly motivated by the interests of the company and of the State," states a report by the International Human Rights Clinic at NYU School of Law and the International Network for Economic, Social, & Cultural Rights.

In March 2013, a bomb blast in one of the besieged villages killed three protest leaders, including one Narhari Sahu. "My son has paid the price for opposing the project with death," said his mother to a visiting reporter. The police argue that the three had been trying to make a bomb that accidentally went off, but villagers insist that the bomb was thrown by "Posco goons" -- thugs who appear to be paid to terrorize the villagers. Criminals have murdered at least one other activist, while several villagers who were too afraid of attack or arrest to leave their homes, even to visit doctors, are said to have died as a result of their virtual incarceration. More than 100 have been injured in police beatings.

"The allegation of human right violation is completely notional and a part of propaganda perpetrated by some vested interest people conspiring both inside and outside India to malign the reputations of POSCO," asserted POSCO-India in a response to the UN's statement.

The villagers' determined resistance has nonetheless stalled the project since 2005, when POSCO signed its Memorandum of Understanding with Odisha. The delay has proved embarrassing for local and national politicians, who cite an analysis by India's National Council of Applied Economic Research to argue that the project will sharply reduce unemployment in the state while providing sizeable tax revenues. Economists reviewing the study found, however, that both claims seem to be "grossly exaggerated." (And as it turns out, POSCO paid for the analysis.)

Most egregious, the official study failed to consider the economic, social, and environmental damage that the project will wreak -- effectively ignoring the costs of a supposed cost-benefit analysis. The POSCO complex will displace 4,000 farming families, for instance, and draw 70 billion litres of fresh water every year from a nearby barrage, depriving thousands more farmers of irrigation. In addition, construction of the captive port will damage the livelihoods of more than 20,000 fishers and farmers and destroy beaches where roughly 100,000 Olive Ridley turtles nest every year -- one of only three such nesting areas on earth.

The National Green Tribunal, a judicial body, had earlier suspended the clearance that the environment ministry had granted for the project, citing irregularities. Although the ministry has again cleared the plant, other hurdles remain; and the port, which fishers have vowed to oppose, still awaits a go-ahead.

As if that were not enough, POSCO plans to feed its plant with 600 million tons of iron ore from the densely forested Khandadhar mountains further inland. This splendid range shelters tigers, elephants, pythons, and numerous other protected species; is sacred to the Pauri Bhuiya, a vulnerable tribe that has inhabited the mountains for hundreds, perhaps thousands, of years; and feeds two rivers on whose waters depend tens of thousands of other farmers.

The high-quality Khandadhar iron ore, for which POSCO will pay exceedingly low royalties, is crucial to the viability of the entire enterprise: the company stands to make a profit of more than $1 billion a year on the ore alone. Even so, it has not even begun the process of obtaining environmental and social clearances for the 25 square kilometres of mountaintop that it plans to mine.

That may be because in Odisha mining companies routinely get away with flouting the law. The Shah Commission, a body appointed by India's Supreme Court to investigate illegal iron-ore mining in the state, found that almost two-thirds of the mines are operating illegally. In consequence, mining companies -- including some globally reputed firms -- have defrauded the state of a total of $10 billion. Pointing to widespread collusion among lawmakers, bureaucrats, and mine owners, the commission called for further investigations by the Central Bureau of Investigation (India's FBI), fines and jail terms for the most egregious offenders, cancellation of mining leases and caps on the quantities mined.

The government's response: none at all. On the contrary, analysts at Deutsche Bank and JP Morgan -- both of which have interests in POSCO, as well as in other mining companies in the region -- assert that curtailing Orissa's iron-ore mining will grievously damage the Indian economy. Manmohan Singh, by all accounts POSCO's strongest backer in India, would seem to agree.

Following the UN's urgent call, the activist group SumOfUS had targeted Warren Buffett of Berkshire Hathaway, which owns 5 percent of POSCO's shares, with a petition campaign to reconsider his faith in the company. Thus far, however, investors appear to be staying put -- and so are the people of Odisha. As an elderly woman explained to researchers, "If you take away our land we will die."