Governance Now, Feb 15-28, 2011
The MoU with Orissa hands it over a bonanza of more than Rs 2,00,000 crore and a captive port to realise it
The “second” final clearance to Posco’s project in Orissa (the first one was granted on December 29, 2009), which comes attached with an astonishing 89 conditions in all - 28 old and 61 new - clearly establishes that a big corporate body can bulldoze its way through all environment and forest laws, regulations, notifications, binding guidelines and Jairam Ramesh.
Given the fact that the Orissa government is determined to set up the project at the very spot, never mind the strong opposition from the locals and gross violation of their legitimate rights, there is no stopping Posco now. The project is a virtual ‘fait accompli’ and is quite in keeping with the history of ministry of environment and forests (MoEF).
All these leave only one option for the victims and all those who believe development is meant for a greater common good, not corporate greed and that is to revisit the MoU Orissa government had signed with Posco on June 22, 2005. This has lapsed and will be renewed any time now. The intervening period provides the only window of opportunity to rectify the gross indiscretion.
A reading of the MoU throws up at least three key elements; two of which are not essential part of the project and the third spells trouble for Cuttack and nearby districts.
These are as follows:
» Proposed “export” of 400 million tonne of iron ore by Posco - which is apart from 600 million tonne it has sought by way of captive mines for producing 12 MT steel a year;
» Proposed “captive” port at the Jatadhar river-mouth and
» Proposed diversion of 10 MGD water from Cuttack’s Jobra barrage by laying 86-km-long pipeline to the project site.
Here is why these provisions require rewriting.
Export of Iron Ore: Posco provides no reason for seeking export of 400 MT iron ore other than a simple statement in the MoU saying that it is for “their existing steel plants in South Korea”. The key lies in decoding what it means for Posco.
Let us do some quick calculations. The FoB price of high-grade iron ore (Posco to get ore with 62 percent Fe content) is anywhere between $180 to $200 a tonne (that is between Rs 8,190 and Rs 9,100).
Praveen Paul, a Bangalore-based mining and bulk logistics expert, calculates that Posco will incur a cost of about Rs 2,500 a tonne – by way of extraction and beneficiation costs, royalty and permit and transportation to the port etc. Officials in the steel ministry and NMDC both say that this figure (Rs 2,500) is rather on the higher side.
Nevertheless, taking the mean FOB to be $190 (Rs 8,645) and the cost to be Rs 2,500, the net gain in exporting one tonne of iron ore works out to be Rs 6,145.
Now, assuming that Posco will be exporting 400 MT iron ore over a period of 30 years (lease period), it will be, on an average, exporting 13 MT every year.
So the net profit for exporting 13 MT of iron ore every year comes to Rs 7,988 crore. At this rate, Posco will earn, over the next 30 years, a whopping Rs 2, 39,640 crore!
That is a huge bonanza and as Paul comments, “a pure and simple gift to Posco”. Imagine, as against this, Posco promises to bring in Rs 51,000 crore for the project.
If Orissa were to export the same iron ore, it will be able to finance nearly 5 Posco plants in next 30 years.
Captive Port: Any wonder that Posco has made a “captive” port an integral part of its MoU? In fact, when the project-affected people approached the state government seeking to shift the project by a mere 3 km down south to avoid displacement of thousands, the proposal was shot down.
Priyabrata Patnaik, the state government’s nodal officer for the Posco project, told Governance Now: “The state government and Posco examined the proposal but both rejected it on technical grounds. It is not possible to shift the project because the port can’t be shifted.” It never crossed the mind of the state government that Posco does not really need a port of its own. There are at least two ports close by.
Pradip port is merely 12 km away from the proposed Posco port and has a capacity to handle 57 MT. It is in the process of adding another 59 MT by next year. A modern Dhamra port with a capacity of over 100 MT has become operational and is less than 60 km away. One more port is being proposed to be developed at Astrang, 25 km from the Posco site.
MoEF’s own expert panels too have questioned the need for the Posco port. The expert appraisal committee (EAC) raised a red flag in November 2010, pointing out the existence of both Paradip and Dhamra ports. The majority report of the MoEF expert team, headed by Meena Gupta, which submitted its report in October 2010, too brought up the same issue and had even sought revocation of clearance to the port for violating environment laws.
Way back in December 2005, minister for shipping, road transport and roadways, TR Balu, had told parliament that “the proposed minor port for Posco steel plant may lead to severe erosion along the coastline posing a threat to the port facilities at Paradip.” But the state government can’t be bothered with such trifles.
Water from Jobra Barrage: Number two of 61 additional conditions in Jairam Ramesh’s order of January 31, 2011 says: “Should there be a shortfall of water at the Jobra barrage for irrigation purposes, the company will voluntarily sacrifice water intake for facilitating irrigation.”
This is nothing short of a bad joke. For one, it admits to an existing water scarcity at Jobra barrage, which supplies drinking water to Cuttack and nearby areas, irrigation water to at least three districts - Cuttack, Jagatsinghpur and Kendrapara - and water to several industries. As it is, Jobra is unable to provide irrigation water in the lean season for the past two years. Will Posco close down its steel plant through “voluntary sacrifice”, as the order proposes, in case of the inevitable water scarcity? Highly unlikely.
It would have been, therefore, prudent to explore alternative source. The majority report of Meena Gupta committee too said that, confirming the existing water scarcity and pointing out that availability of water at Jobra was not even considered while signing the MoU. Worse, alternate sources exists - Hansua Nullah and Mahanadi’s downstream close to project site.
The conduct of the state and central governments may not inspire confidence, but this is the last opportunity to rectify what would be a monumental blunder if Orissa were to go ahead with its MoU unchanged. n
prasanna@governancenow.com
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