Around a third of India Inc’s investment plans are in states affected by Naxalism.
Anyone who’s been reading Mahesh Vyas regularly, including his piece on today’s OpEd page, knows India Inc’s investment juggernaut has rolled on relatively unchecked, despite the global crisis, for the past five years. The investments on hand, the CMIE (Centre for Monitoring Indian Economy) chief’s calculations show, have the potential of increasing India’s GDP by 50 per cent and almost trebling the number of those employed in the factory sector in just the next six years. Today, however, this juggernaut is in serious trouble. Around a third of the Rs 94,00,000 crore of investments planned is in states like Bihar (1.1 per cent), Jharkhand (4.6 per cent), Orissa (10 per cent), Chhattisgarh (4.3 per cent), Andhra Pradesh (7.5 per cent), Madhya Pradesh (3.4) and West Bengal (5.6 per cent), large parts of which are affected by Naxalite violence. Add to this states like Haryana and Maharashtra, where getting land for large industrial projects is becoming difficult, and the problem gets magnified. That there is a huge failure of governance which has led to this sorry state is obvious, but what’s less obvious is that the failure has not been on just the government’s part.
The Naxalite-hit districts of the above-mentioned states are India’s richest in terms of mineral wealth but the poorest in terms of income, access to healthcare, education and employment. That a Madhu Koda in Jharkhand could have accumulated over Rs 4,000 crore, and counting, by handing out lucrative mining leases, tells you just how badly the population of these states have been shortchanged. It’s hardly surprising then that the locals are resisting any attempt to give up their land for industry and/or for mining. (Around 15 per cent of the total investment planned is in the mining and metals sector.) The solution to both issues are linked, and once again, India Inc is to be blamed for the failure in governance.
It is obvious that if mines are auctioned, the Kodas of the world will not be able to make the kind of money they do. While it is understandable the political class doesn’t want to give up its golden goose, what one fails to understand is India’s top corporate honchos too are united against auctions. Some argue this will drive up prices of raw materials, making their steel and other mills unviable, never mind that prices of minerals like iron ore are determined by global prices, not costs. In any case, when firms like Reliance Industries Limited and JSW Steel remain profitable while buying all their raw materials at market prices, the case for keeping mineral prices low loses its potency.
There is then the argument that more than costs, it is the assured supplies of minerals that is critical, and that’s why captive mining is crucial. What this argument ignores is the likelihood of supplies rising hugely when there are players whose profits depend upon finding more minerals — think Reliance and think KG Basin gas. As the Hoda Committee pointed out nearly three years ago, allowing large miners in would help find more minerals. India’s expenditure on survey and exploration work is $5 mn a year as compared to Australia’s $500 mn and Latin America’s $700 mn. India’s known reserves of all minerals have risen faster than production — iron ore reserves rose from 11,469 million tonnes in 1980 to 12,197 million tonnes in 1990 and 12,906 million tonnes in 2000. By contrast, Australia’s iron ore reserves rose from around 400 million tonnes in 1966 to over 40 billion tonnes by 2005, after having extracted over 3 billion tonnes in the interim period. It’s obvious even steel and aluminium firms will benefit from increased supplies, but none of them is willing to see this. And, the political class, anxious to carry on with its rapacious ways, is only too happy to exploit industry’s short-sightedness.
Land is the other area where industry is being incredibly short-sighted. While you hear of the bloody fights at Singur, of Posco not getting land in Orissa and so on, JSW has had no problem getting 4,800 acres of land in Naxalite-hit West Bengal. (The Naxalites ensured the police escort car in the convoy comprising the chief minister of West Bengal, the country’s steel minister and the JSW chief was blown up after the inauguration ceremony.) As many as 750 families on the land were relocated peacefully, while 450 families on the land Posco wants to acquire in Orissa continue to hold up the project. JSW achieved this by paying Rs 3 lakh per acre to farmers (the market price was Rs 80,000). It also gave them the company shares worth another Rs 3 lakh per acre — this way, the land-losers have a stake in its progress. The tremendous goodwill this got JSW cost it less than 1 per cent of the total project cost. In Jharkhand, the company took 250 acres, kept 70 acres, redeveloped the rest and gave it back to the villagers; in Rajasthan, it faced no problem getting 20,000 acres for its lignite mines... You’d think industry would have learnt from this — if the Tatas had matched the Rs 12 lakh per acre the West Bengal government paid for the 1,000 acres at Singur, it would have added just Rs 120 crore to its costs! Think of what this would have done to its image. Corporate Social Responsibility is now an integral part of industry’s survival. It is no longer the fashionable stuff talked of in cocktail parties and forgotten in boardrooms.