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Indian Betel Farmers Battle South Korean Steel Giant

by Moushumi Basu with Pratap ChatterjeeSpecial to CorpWatch
August 30th, 2011

Sukhdev Sahoo mourns the loss of his betel farm. Photo: Basant Sahoo

Farmers of the humble betel leaf, a mild stimulant chewed by millions in India, are challenging a South Korean steel giant. The confrontation is yet another David versus Goliath battle pitting “progress” against traditional agriculturists.

The stage is the district of Jagatsinghpur in the eastern state of Odisha (previously known as Orissa), which lies in between the state capital of Bhubaneshawar and the Bay of Bengal. On one side of the struggle are some 3,000 families who grow betel vines on small farms that dot a 4,000-acre parcel of mostly forested lands. Each plot generates $250 to $450 a month in income.

One the other side is the Pohang Iron and Steel Company (POSCO) one of the world’s top five steel producers. It operates two of the world's biggest steelworks at Pohang and Gwangyang in South Korea. They produce some 31.2 million tons of crude steel a year and generate $21.5 billion in revenue. In June 2005, POSCO signed a memorandum of understanding with the government of Odisha to build a steel plant in Jagatsinghpur. The five-year agreement has expired, and a new agreement is currently being negotiated.

POSCO has offered the Jagatsinghpur betel farmers $8,000 to $11,000 for their land, but many have refused to sell, charging that the Odisha government has ignored their opposition to the steel plant.

"I woke up in horror on June 13, seeing the state administration had demolished my betel farm," 73-year-old Sukhdev Sahoo told reporters. "I was threatened: `If you don't take the compensation money you will lose everything.’"

Three days later, scrounging through the uprooted vines, Sahoo broke down. "I did not cry so much when my son died. My grandchildren will not have anything for the future."  He estimates that the  $7,800 compensation package will barely cover three years of earnings from his betel farm.

Two Competing Visions

The essential battle over the betel farms has been repeated many times in different forms since India won independence from the British Empire in 1947. And as before, the struggle – this time to stop POSCO  – encapsulates the chasm between two competing visions of how the second most populous country in the world should develop within the modern world. Jawaharlal Nehru, the country's first prime minister referred to dams and factories as the "temples of modern India," and his successors have gone cap-in-hand to international agencies such as the World Bank to fund major development projects such as the Narmada Valley Dams.

Rural communities – with the help of city-based activist groups – have struggled to stop the mega-projects. They argue that the displacement of traditional communities, as well as the major environmental impacts of these projects, outweigh the financial benefits. The Narmada dams, for example, while generating electricity and irrigating great areas, would destroy villages and traditional farmland, displacing millions of people. Some protest movements successfully limited development projects, but others have failed.

In the last 20 years, New Delhi has also started to welcome direct investment by multinational corporations seeking to build factories and power plants across India. These projects sparked a new wave of protests. In the early 1990s, when Texas-based Enron proposed building the Dhabol power plant in the western state of Maharashtra, major protests caused cancellation of the project.

Similar protests against the "Nano" auto assembly plant in Singur, West Bengal, lead to major violent confrontations. The Tata group, an Indian company, was to build the facility in 2006, and the following year the Salim group of Indonesia in Nandigram, was to build a chemical industry hub also in West Bengal. Protests led to the cancellation of both contracts.

In every case, the state governments offered up rural lands to attract billions of dollars from outside investors. And consistently, state government officials failed to consult the local farmers who worked the land. Subsequent protests by these rural communities have then been magnified by environmental groups and opposition political parties, albeit sometimes in uneasy alliance.

According to a study last year by the New Delhi-based Associated Chambers of Commerce and Industry of India (ASSOCHAM), such delays in land acquisition are threatening to scupper $100 billion in foreign investment including 22 major steel projects worth $82 billion.

The fight against POSCO


POSCO is the latest company to face a backlash from traditional stakeholders and environmentalists. The company proposes investing $12 billion to build a steel plant with a 12 million ton annual capacity, a port, and iron ore mine. If allowed to go forward, it would be the largest foreign investment in India today, as well as POSCO’s most ambitious single overseas project.

"The project is very important for us,” a POSCO-India official told CorpWatch, speaking on condition of anonymity. “India is a great emerging market, with a huge growth potential, where demand for steel is growing fast. We must have a production base here for our future growth. We also need the plant for our competitiveness in terms of production cost, as the plant will be located near an iron ore mine," he said.

In return, the state of Odisha has to provide 4,004 acres of land, and POSCO will offer each local family a compensation package of $13,500 per acre. But after the government demolished 50 betel vine farms, farmer reported they were given just $189,000 in compensation.

POSCO has sweetened the deal by pledging to employ one person in every family at the new plant. Indeed the company predicts that as many as 870,000 new jobs will be created because of the project, according to claims posted on their Indian website.

Yet even the issue of jobs remains controversial. "The local people do not have the expertise to work for us," a senior POSCO official told CorpWatch on condition of anonymity. "At best, we can offer jobs as gardeners or as daily wage [day laborers] during construction. But with a big project in their area, they will have ample scope to run small shops or become drivers."

Community activists say that this is not sufficient. Prashant Parikray, a local activist, told CorpWatch: "It is for the project proponent[s] to impart vocational and skill development training to the locals and groom them for employment in their company. After all the project developers will be taking away the land of the locals, which has been a sustainable source of livelihood of the villagers for generations and [should] not leave them insecure."

The government's heavy-handed actions have not helped. Naveen Patnaik, chief minister of Odisha, denies allegations that police forcibly seized the land. "I have often said, we believe in peaceful industrialization," he said in a press statement issued this summer when protests reached a peak.

Vikas Saran, vice-president of POSCO India, backed him up: "No force, nothing is being used. That is what I have heard. So it is all politically motivated, nothing else," he said.

Forest Rights

Despite a history of conflict over similar projects elsewhere in India, the government may not have anticipated the backlash. "When the project site was selected, government did not consider that compensation would have to be paid for this land, as a majority of it was forested," said Biswajit Mohanty, an environmental activist with Wildlife Society of Orissa.

But in 2006, a year after the Odisha government signed a memorandum of understanding with POSCO, the Indian Parliament passed the Scheduled Tribes and Other Traditional Forest Dwellers Act. This Recognition of Forest Rights Act, as it is also known, codified the land rights of local communities that can prove they have been using the land for at least 75 years.

In August 2010, the environment ministry put POSCO's land acquisition on hold after a government commission found that the deal might violate the Forest Rights Act.

The hold has since been lifted. "Despite the existing provisions of the act, the Union Ministry of Environment gave its approval saying it would have to trust the state government's procedures involved in the process," says Mohanty.

Uncertain Future for All


For six years the villagers have kept up their opposition, and appear unlikely to yield. For some, tenacity is fueled not only by attachment to the land, but by grief and outrage. Fourteen-year-old Bapina Mandal, lost his father three years ago when he was killed during an anti-POSCO protest. "It is now left for me, my mother, and elder sister to carry on the agitation on our own," he says. "I am even missing my school [since] I can't afford to leave the barricade," his friend Satikanta Sahu added.

These protests, together with ongoing legal battles, appear to have convinced POSCO to consider other options. Just over a year ago, in June 2010, the company signed a memorandum of understanding with the southern state of Karnataka in Bangalore for a smaller plant.

In doing so, the company is taking a leaf out of the book of the giant Indian corporation, Tata, which abandoned Singur in West Bengal in September 2008, when Narendra Modi, the chief minister the state of Gujarat offered land for the Nano car plant. Less than two years later, the factory was built and the first car rolled off the assembly line.

Complex Political Alliances


The conflict between traditional farmers and industrial development is just one – although a very significant – aspect of the many troubled foreign direct investment projects that are languishing across India.

Another important factor is a general mistrust of outside investors, a legacy of the fight that Jawaharlal Nehru led against British colonialism. For almost four decades, the Indian government had severely restricted the role of multinational corporations. Opposition to such ventures as the entry of companies like Coca-Cola and Pepsi spanned political parties from Communist to right-wing nationalists.

But since the 1990s, those same groups have been increasingly welcoming of foreign ventures and have been competing for the billions of dollars they offering in exchange for India’s low wages and natural resources. Indeed, it was the Communist Party of India (Marxist) that invited the Tatas and the Salim group to invest in West Bengal. And when Tata took the Nano factory away from West Bengal, it was at the invitation of the right-wing Bharatiya Janata Party (BJP), which has been linked to Hindu fundamentalists.

So it not surprising, then, that Naveen Patnaik, the chief minister of Orissa, has a complex history of political alliances and a mixed record of social justice.

Patnaik, who was born a year before India's independence, is the son of Biju Patnaik, a famous freedom fighter. He joined politics in 1997 at the age of  51 as a "pro-poor" clean politician from a new party named after his father, the Biju Janata Dal. Over time Patnaik loosely allied himself with the BJP in order to win two terms as chief minister.

In the 2009 elections Patnaik severed links with the BJP to take a stand against the 2008 ethnic cleansing of Christians, and joined forces with left wing political parties instead. He won a third term in office, and cemented his reputation as a politician of the people.

But some activists are skeptical. "The pro-poor stance is only an image," Dhirendra Panda, a Bhubaneswar-based activist told Tehalka magazine. "What Naveen Patnaik is, is pro-corporate. Since he came to power, he has signed MoUs (memorandums of understanding) for at least 45 steel industries to mine in the state."

In addition to supporting POSCO, Patnaik has been actively helping Vedanta Resources, a British company that wants to mine for bauxite in Orissa’s Niyamgiri hills. The Dongria Kondh tribe, which considers the hills, streams, and jungles sacred, fiercely opposes the project

Patnaik’s alliance with the foreign company has become easy ammunition in India's charged political atmosphere. Jual Oram, the BJP president in Orissa, accused the Patnaik government as "working as a tool of big companies"—an ironic accusation for a political party that has been more than eager to work with industry in the past.

Active Opposition


While Patnaik has adroitly maneuvered the political system in Orissa, he may still fail to defeat the local opposition to his industrial development plans.

The central government of India has so far refused to grant final clearance for Vedanta's mine. Human rights groups including Amnesty International and Survival International have actively campaigned on behalf of the tribe and won support from such diverse quarters as the Church of England and the Norwegian government, which sold off its shares in Vedanta over human rights concerns.

And the villagers of Jagatsinghpur stand an even chance of winning--either via a legal battle over land rights or simply by wearing down POSCO’s patience.

At the end of the day, the local farmers say that the struggle has to be seen as a simple question of social justice and sustainability.

"Why are the government and the state upset over the so-called biggest FDI [foreign direct investment] when we, for generations to come, could remain happy and prosperous with our vibrant economy based on paan [betel], besides mina [fish] and dhan [rice] without any such project which promises only to destroy everything around us?" asked Abhay Sahoo, one the protest movement’s leaders. "It is not that we are resisting change. What we fear is losing whatever we have. We are content with our way of life, our basic community needs of health, education, potable water are met easily," he added.