Page last updated at 00:08 GMT, Tuesday, 18 March 2008

Indian iron firms battle for rural support

By Neil Heathcote
Editor, India Business Report, BBC World, Orissa

Miner Jaya Sethi
Jaya Sethi has had to swap farming for mining

There's a "goldrush" under way in Orissa, one of India's poorest states - but it is not actually gold everyone is chasing - it's iron.

The ore is in heavy demand by global steelmakers. Industry giants like Arcelor Mittal, Posco, and Tata Steel have all announced ambitious plans to build vast foundries in the area.

But the path to industrialisation of this rural state is not proving smooth.

Breaking rocks may not be an easy way to earn a living, but for Jaya Sethi the iron ore mine just outside of Keon Jhar has been a lifesaver.

He's a small farmer, but, with less than an acre of land to live off, he found the debts were piling up. So he came here to try and pay them off.

"I couldn't earn enough from my land to support my family," he says.

"I still do some farming, but it's thanks to this that we've been able to survive."

'Chinese boom'

After dark, local people stay off the roads and the trucks take over.

A vast convoy of lorries sets off on the overnight drive down to the coast.

Much of the iron ore goes straight to the ports, where it's shipped out of the country to be turned into steel overseas.

For the mining companies, business has never been better.

Visa Steel plant
Visa Steel has built on government land

"With the Chinese economic boom, we found that the whole export market opened up," says SK Patnaik from the Eastern Zone Mining Association.

"It has scaled up by not less than five to seven times."

The state of Orissa sits on vast reserves of iron ore, a key ingredient in making steel.

And as demand for steel has surged internationally, so has interest in places like Keon Jhar.

The local government is hoping it'll unlock the biggest wave of investment Orissa has ever seen.

But rather than simply selling its ore, it wants international steel companies to set up in the state. It sees a chance to create jobs and generate wealth in India's poorest state.

Local opposition

Industry has willingly responded. The giants of the industry - Arcelor Mittal, Posco, Tata Steel all want to build steel plants here.

With the economy booming at home in India, they can see the demand for local steel rising rapidly.

A tractor should not be manufactured on paddy fields; just as rice cannot manufactured in a factory
Tamil Pradhan, leader of PPSS

More and more people want to buy goods like cars and refrigerators, but the market is only just taking off.

But while the state needs the jobs, not everyone wants the steel plants.

Posco's plans for a foundry and port on the coast have met with strong local opposition.

The company has redrawn its plans 60 times, to reduce the impact on local villages - but eight will still have to move.

Work is due to begin on 1 April, but one village, Dhinkia, is still refusing even to negotiate.

'Balanced growth'

The villagers say they don't oppose industrialisation - but don't see why it should be on fertile agricultural land - their land.

"There should be balanced growth of the agricultural economy and the industrial economy," says Tamil Pradhan, the leader of PPSS (Posco Pratirodh Sangram Samiti) the anti-Posco movement.

"But a tractor should not be manufactured on paddy fields; just as rice cannot manufactured in a factory."

Dhinkia villagers
Not everyone has welcome the ironmasters

The issue has split local communities. The other seven villages are prepared to negotiate with the company.

Police now stand guard over the road into Dhinkia to prevent the two sides clashing.

Some families living close to Dhinkia fled the violence last year.

Now they're quite literally in the Posco camp. The company has built them temporary homes away from the disputed area, and is paying them til they find jobs.

'Rehabilitation package'

At the local Posco office the company is waging a broad campaign to win over village leaders.

It's promising new land, new homes and jobs for those displaced. It's given out bags for schoolchildren and set up a mobile health centre.

"We are pretty sure that with the passage of time, the project will receive more and more support," says Posco's Shashanka Pattnaik.

Both the company and the state government hope the compensation package will simply prove too good to resist.

They'll realise that industry is a necessity for them
P Modi, director at Visa Steel

They certainly want to avoid the violent clashes with farmers that have scarred other industrial projects in India over the past two years.

For Orissa, a lot is riding on getting it right - a problem with Posco could scare other investors away.

Priyabrata Patnaik, principal secretary with the commerce department in the Orissa state government, says the villagers will eventually come round.

"All that they want is a proper rehabilitation package. And like anybody who's being affected, or being displaced, they want the best."

And industrialisation is arriving anyway. The government has signed deals with nearly 50 steel companies.

'Needs created'

Visa Steel is building a steel plant in Kalingar Nagar, an area the government hopes will become India's "Capital of Steel".

It's avoided problems with farmers by building on government land. It too says that local opposition to the arrival of industry will prove temporary.

"With industry coming, needs are being created," says BP Modi, director at Visa Steel.

"Before now, people had no needs. But when they see that their children can go to school, that in the neighbour's house there is a television... that's when they'll look for work.

"They'll realise industry is a necessity for them."

But the road will not be painless. Many farmers suspect that the steel companies will create jobs, but not for them.

Others fear what it will do to their traditional, rural way of life.

So for the moment, change is slow. It's people like miner Jaya Sethi who have made the leap from farming to industry - because they had few other options.

Jaya knows he has to make ends meet, even if that means he's no longer living not off the land, but off the riches buried beneath it.

Print Sponsor

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific