 "Bhushan Steel plant at Meramandali")
The past decade has been industrially the most active for Odisha since its creation as a separate state in 1936. During this period, the state has attracted investment commitments of Rs 8.8 lakh crore through 93 MoUs (memorandum of understanding) with large- and medium-sized companies from within the country and abroad.
The investments lined up are mostly in the mineral-processing sector, based on the state's rich deposits of basic minerals such as coal, iron, bauxite, manganese, chromite and dolomite.
Of the total investment proposed, Rs 2.15 lakh crore has already been utilised in building projects to make steel, aluminium, power, cement and port facilities. According to government data, 41 of the 93 MoUs have been implemented in terms of full or partial commissioning of projects.
The state's investment conversion ratio of about 25 per cent may not compare well with some developed states like Gujarat and Maharashtra, but it is impressive considering the state's demographic handicap and historical backwardness - reasons often cited by Chief Minister Naveen Patnaik to explain the high incidence of poverty in Odisha.
Nearly a quarter of the state's population comprises tribals. The state has also lacked the requisite financial resources to invest in infrastructure and industry. Nor have successive governments at the Centre, which built a variety of institutions, infrastructure and industry in different parts of the country after Independence, been overly generous towards the state.
Coupled with this, the erstwhile Freight Equalisation Policy of the Centre, which ensured that raw material was available to industry at their locations anywhere in the country at the same price as in the source state, hindered the industrialisation process in Odisha, as promoters preferred to set up their plants in other states that had better incentives and infrastructure facilities, using natural resources drawn from Odisha, instead of looking at the source state, which was low on infrastructure facilities.
The scrapping of this policy in the early 1990s saw a rush of investors queuing up to set up industries close to raw material sources in Odisha, to reap the cost advantages. Further, the state government's policy of recommending mine leases in favour of industries that had value addition facilities within the state, and the boom in the world metal market at the turn of the century, saw the investment rush, which began in the late 1990s, peaking between 2003-04 and 2009-10.
This period saw industrial power houses like the Tatas, Vedanta, Jindals and A V Birla group from within the country, and giants like Posco and ArcelorMittal from abroad making a beeline for Odisha with big-ticket projects.
In tandem, the state's fiscal health improved considerably. The revenue deficit in the budget, which had widened to over Rs 2,000 crore by the turn of the century, was not only bridged, but has also been in positive territory since 2003-04. The gap in the per capita income between the state and the national average has narrowed. And the state's gross state domestic product (GSDP) grew at a robust 8.82 per cent a year in the 10th Plan and at 7.01 per cent a year in the 11th Plan.
However, the jolt to the mining sector, the key driver of the state's economy, after the discovery of irregularities and the subsequent judicial interventions, the delay in implementation of some large projects and the fallout of global recessionary trends have had their impact on the state's growth. Odisha's economy grew at a modest 5.60 per cent in 2013-14, compared with 8.09 per cent in 2012-13, the first year of the 12th Plan.
Several factors have further vitiated the investment climate. ArcelorMittal has withdrawn from its proposed Rs 40,000 crore steel project in the state, complaining about delays in land acquisition and allotment of mines; Jindal Steel and Power (JSPL) has announced the shelving of its Rs 60,000 crore coal-to-liquid project on the back of cancellation of its captive coal block; Vedanta is struggling to keep afloat its Lanjigarh alumina refinery and Jharsuguda aluminium smelter, built at a combined cost of Rs 60,000 crore, on denial of access to the Niyamgiri bauxite reserves; and Posco is unable to take forward its projected $12-billion steel mill owing to problems in land acquisition and allotment of captive mines.
Some of the issues concerning non-implementation of these projects are under the authority of the Central government - such as the denial of access to Niyamgiri bauxite reserves to Vedanta, and the cancellation of the coal block allotted to JSPL coal block and Posco's captive mine. Others are under the ambit of the state government - such as land acquisition for Posco and ArcelorMittal, and identification of an alternate bauxite source for Vedanta.
Most of the industries that were attracted to the state by its rich mineral reserves are facing raw material shortages because, though the state government has reserved 50 per cent of Odisha's mineral output for use by local industry, most mines are closed owing to court orders or statutory clearance issues. As a result, the state's steel production fell from 12.5 million tonnes in 2012-13 to 10.5 million tonnes in 2013-14.
To overcome the land acquisition problem, the state government has decided to create land banks at different locations. It has also decided to shift its focus to non-mineral-based industries like agriculture, tourism and information technology to spur growth, having formulated progressive supportive policies.
BS Pani, an industry analyst, predicts that "strong political will coupled with implementation of policies and facilitation process for industries in a time-bound manner will definitely catapult the state to the pinnacle of growth and prosperity."
