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Dr. Manmohan Singh

Prime Minister of India

South Block, Raisina Hill

New Delhi

India-110 101

Dear Sir,

We write to ask that the integrated iron ore mining and steel project proposed by POSCO in Orissa be cancelled. We outline the reasons for our request below.

The 12 billion dollar POSCO project, with a mega steel plant and a captive port and iron ore mines, represents the single largest infusion of foreign direct investment in India. Per the government of Orissa, the project will “bring prosperity and wellbeing to its people” and is celebrated by your administration as a success story of India’s economic liberalization. Yet the project faces strong resistance from villagers who will lose their lands and livelihoods and 5 years after the project was launched, POSCO has yet to build a single facility or produce a gram of steel.

1. The POSCO Project Makes No Sense From an Economic Standpoint

The government and POSCO have made grossly exaggerated claims of project benefits – inflated the number of jobs that will be generated by the project, given misleading projections for tax revenues, and created a false impression of the project’s desirability by providing a dishonest cost-benefit analysis.

The employment potential of the project has been vastly overblown by the government –the much-touted “870,000 man years of employment for 30 years,” a figure that is 50 to a 100 times more than the real figure of less than 10,000 direct jobs and less than 20,000 direct and indirect jobs in the next 5-10 years. The real numbers represent a less than 2 percent reduction in current unemployment levels as against the exaggerated claims by POSCO that the project will almost entirely wipe out unemployment in Orissa! Further, due to issues of skill mobility and mechanization, most of these jobs will not go to the project-affected population.

Orissa government claims that the project will eventually contribute more than 10 percent of the state’s domestic product. But given that the POSCO steel plant and captive port would be in a Special Economic Zones (“SEZ”) and would benefit from many tax concessions, the tax revenues projected by the government are vastly inflated and patently in error. For instance, the numbers seem to imply that the corporate tax that POSCO would owe the state would be higher if it has SEZ status, than if it doesn’t!

The supposedly independent cost-benefit analysis being touted to make the project appear desirable is unfortunately entirely discredited now after the revelation that it was paid for by POSCO. This analysis also exaggerates claims of benefits by overstating revenues and underplaying costs.In addition, the analysis inflates the project’s potential for generating employment while almost completely ignoring the loss of employment from the destruction of the current agricultural economy.

2. POSCO must be clearly told that it is not welcome because it has shown great disrespect for Indian laws

As has been pointed out by multiple individuals and organizations, including inquiry panels appointed by your own administration, the POSCO project is mired in illegalities. POSCO has not shown the least inclination to meet the spirit or even the letter of the law. It appears that there have been gross violations of procedures leading to significant miscarriage of Indian law, such as the Forest Rights Act, the Coastal Zone Notification Act and the Environmental Impact Assessment. There is no doubt that all three of the above have been jettisoned by the Orissa government.

Reports by non-governmental groups also reveal significant problems on multiple fronts, including submittal of fraudulent information by POSCO to get environmental clearances.

3. Local Residents Do Not Need or Want The Project

The local resistance to the POSCO project has lasted for more than 5 years even in the face of brutal repression from the state’s security apparatus. Tribal villagers and other traditional forest dwellers are resisting this so-called ‘development’ project not because they do not understand the potential benefits of the project, but because they do. They understand that the project will bring them no benefits while destroying the thriving local economy and forcing them into poverty and destitution.

There is a thriving agricultural economy in the three gram panchayats at the plant/port site, centered on but not limited to betel vine cultivation. Betel vine cultivation is feasible on very small plots of land and provides a steady, reasonable income both to the owner-cultivators and to wage labourers. This economy will be completely destroyed by the project, displacing an estimated 22,000 people.

The rehabilitation package on offer from POSCO is not even close to reasonable compensation for the losses that will be suffered by the people. For instance, the average loss of income for a cultivator is more than 100 times the compensation on offer.

In addition, an estimated 20,000 to 25,000 people from neighboring communities would suffer loss of their livelihood as fishermen because of the proposed captive port to be built by POSCO. These people are not even referred to in any relief and rehabilitation plan.

The above are some of the core reasons that we firmly ask that the POSCO project be cancelled. As pointed out by various commentators, even if the various clearances for the POSCO project are somehow granted, the POSCO project would still not provide any net financial or employment benefit to Orissa or to India.



Written by janjagriti

November 9, 2010 at 11:02 am

Posted in Articles

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