Transnational corporations and big business houses are flocking to set up projects in the eastern Indian state of Orissa, attracted by its rich mineral resources. Unfortunately, the projects will not benefit the local people, and will in fact threaten their livelihood besides causing environmental damage.

By Kavaljit Singh

June 1999

In the 1980s, Orissa got the attention of the world when the media exposed the incidence of large-scale starvation deaths and selling of children in Kalahandi and other districts. Such incidents still take place. But the attention has now shifted from these human stories to financial matters. Orissa is once again in the news, but for different reasons. In Orissa, the new buzzwords are 'foreign investments', 'export promotion' and 'privatisation'.

Recently, Orissa has appeared on the investment map of India with a long list of investment proposals, largely backed by foreign investors. Historically, Orissa had the image of a 'backward state' (which is still debatable) but this old image has now been destroyed by the sheer amount of new investment proposals which it has attracted, since 1993, with the announcement of new power, infrastructure and mining policies to woo foreign and domestic private investments.

During 1995-96, Orissa received the largest amount of private investments in India, both foreign and domestic, followed by Gujarat, Karnataka and Maharashtra. In the post-liberalisation period, Orissa ranks sixth in foreign investment, having attracted Rs973,000 million of investments in the last five years.

Why Orissa? Although some of the new proposals have still to materialise, the list below raises the basic question as to how Orissa, a 'backward' state, can attract such mega investments. The answer to this question is not very difficult if we examine the nature of these new projects.

Mega Investment Proposed


Company                                          Proposed Project         Location             Cost
                                                                                                                        (Rs million) ______________________________________________________________________

Consolidated Electric Power                 Power                       Jharsuguda       160,000
Larsen & Toubro Ltd                            Steel                         Gopalpur           70,000
TATA Steel                                          Steel                         Gopalpur           65,000
Ganapati Exports Ltd                            Steel                         Duburi              60,000
Hindalco Industries Ltd                         Aluminium                 Kalahandi         50,000
Indian Oil Corporation                          Oil Refinery               Paradeep          50,000
Nippon Denro Ispat Ltd                        Oil Refinery               Paradeep         50,000
MESCO                                               Steel                         Duburi              42,690
Oswal Agro Ltd                                    Fertilizer                   Paradeep          42,200
Utkal Alumina                                       Aluminium                 Rayagada         30,000
Ashok Leyland                                     Oil Refinery               Haridaspur        24,000
Consolidated Electric Power                 Power                       Ib Valley           20,750
Neelachal Ispat Nigam Ltd                    Steel                         Duburi              15,250
Indian Seamless and Alloys Ltd             Steel/Pig Iron                                    13,770
Orind Steels Ltd                                   Cold Rolled Steel       Duburi             11,500

Source: IPICOL, Government of Orissa. ______________________________________________________________________

The majority of the new projects are solely attracted by the rich mineral resources of Orissa, and are therefore located in mineral-rich regions.

Orissa has 90% of India's chrome ore and nickle reserves; 70% of bauxite; and 24% of coal reserves. With no other state having such abundance of natural resources, the transnational corporations and big business houses have no option but to set up steel, aluminium and coal-based power projects in Orissa only. Besides, the state government is offering exceptionally huge subsidies to investors, in the form of guarantees, tax concessions and investment subsidy. The abundance of cheap labour further makes it an investor-friendly state.

Who benefits, who loses? The state government boasts that the new investments will spur growth which, in turn, will help in poverty alleviation. But this argument finds little evidence in Orissa (and elsewhere) as growth in itself does not promise to 'trickle down' to the poor.

For instance, Orissa has a surplus in power and intends to be the 'Powerhouse of India', but less than 20% of people living in rural Orissa have access to electricity. Further, the state government argues that by attracting foreign and domestic private investments and privatisation of its public sector units, it will put more resources for social sector spending to alleviate poverty.

But this argument too has no basis in reality. Although the state government has withdrawn from big investments in infrastructure, this has not led to a commensurate increase in the allocations to social sector programmes. There is no correlation between decline in infrastructure spending and increase in social sector spending.

There is no denying the fact that Orissa badly needs massive financial resources and better delivery systems to uplift the living standards of its population as its per capita income is far below the national average; 44% of the population is below the poverty line; 47% has none of the three basic facilities - electricity, safe drinking water and sanitation; and the literacy level is just 49%.

Instead of taxing the rich to raise adequate financial resources to support anti-poverty programmes, the state government is offering more and more concessions to the rich, big business houses and TNCs for investments through tax exemptions, investment subsidies and guarantees.

Orissa need not offer huge subsidies to investors involved in mineral-related industries, as they have no other state in India to go to. No other Indian state can match the mineral resources of Orissa. By offering these subsidies to new investors, the state government has unnecessarily created a financial resource crunch which it plans to fill through the outright sale of public sector units and privatisation of basic services, which directly affects the poor as they do not have purchasing power to afford basic services.

Furthermore, Orissa's economy has always faced the problem of 'capital flight' as the returns of industry and service sectors went to other states and were not ploughed back into the state. Now, this problem is further going to be accentuated as these new projects have substantial investments by TNCs and 'capital flight' will not be restricted only to other states within India but will also move out of the country. Thus, the long-term economic benefits of these investments are very much in doubt.

The job prospects are very bleak as many of the new investment projects are heavily capital-intensive and are thus unlikely to create new jobs for the local population, while the senior and managerial jobs in these projects are likely to be filled by persons outside the state.

On the other hand, the people whose lands will be taken away to set up these projects will face a bleak future not very different from that of other oustees in Orissa who have been uprooted through large dams, mines, coal-based power projects and heavy industries in the past, and who received only meagre cash compensation with no jobs and agricultural lands.

Not only does the state government not consult people or find alternative sources of livelihood for them, it has not even bothered to examine the extent of negative impacts on their lives, which raises the basic question of: development for whom?

There are adverse environmental consequences as well. According to a recent study by the Institute for Policy Studies (IPS), greenhouse gas emissions from Orissa alone make up 1% of the global emissions. The study further points out that Orissa's industries and coal-fired power plants will be emitting 164 million tons of carbon dioxide annually by the year 2005, or the equivalent of about 3% of the projected growth in man-made greenhouse gases anticipated globally over the next decade. In addition, Orissa's industrialisation will release toxic and potent global warming agents equivalent to 8 million tons of carbon dioxide emissions.

Already, existing plants have caused widespread land degradation and water contamination in the regions, thereby affecting the health and livelihood of people. The East India refinery project at Paradeep has come under close scrutiny by environmentalists who argue that this refinery will adversely affect the coastal forest areas by its emissions and will also endanger the rare species of Olive Ridley Turtles which visit the area every winter.

Moreover, one wonders why there is a need for new power projects in the state when Orissa already has a power surplus. Power is a commodity that cannot be stored, it has to be distributed immediately. As the present national grid system is not suited to import power from Orissa, it makes no sense to have more plants to generate extra power without being able to use it. Thus, these new power plants are not going to serve any purpose except to exhaust Orissa's natural resources and destroy the environment.

Paradise for a few, hell for millions: given the kind of scenario fast emerging, we will soon be witnessing two different Orissa. One, for a small number of rich people, globally linked with international capital and trade through super-highways, telecommunications, corporate farming and infrastructure; and the other, consisting of millions of poor people, struggling to survive in an increasingly inhuman and polluted environment. - Third World Network Features

About the writer: Kavaljit Singh is a social activist and Director of Madhyam, a public interest and research NGO based in Delhi.