In June 2005, the state government of Orissa, signed a Memorandum of Understanding (MoU) with the South Korean company Pohang Steel Company (POSCO) for the establishment of a 12 million tonnes per annum Integrated Steel Plant at Ersamma Block of Jagatsinghpur district of the state. The POSCO deal was a part of the wave of investments in the steel sector that hit the state in the last few years during which almost 43 MoUs in the iron and steel sector, worth Rs.1,60,132 crores have been signed by the Naveen Patnaik-led Biju Janata Dal government. This project of the third largest steel company in the world is the biggest foreign direct investment in the country at 12 billion dollars. According to the MoU, the project has several linked components including that of a captive mine, railway line, captive port, and an integrated township.

There are serious social and environmental issues embedded in and around this project. The state government of Orissa actually accepted a project which was rejected by Brazil on the grounds that the company was not ready to pick up ore at market prices, according to report in The Hindu. But the Orissa government laid down the red carpet and offered the project, SEZ status and several privileges including export of iron ore, sale of raw material at cheap rates and so on.

A week before the public hearing on the environmental impact assessment, 15 platoons of para military forces were deployed in Kujang.

Since the hearing was held more than 20 kms from the project affected panchayats, most people boycotted the hearing.

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A glance at the MoU of the project show the promises that clearly set the agenda for the saga that has unfolded since then. Amongst other things, the state government promised to POSCO that it will recommend areas which are free from litigation as well as encumbrances; and all iron ore mining leases and prospecting licenses will be free from encumbrances. The government also signed on the dotted line to assist the company in obtaining all clearances including forest and environment clearances for different aspects of the project; and of course make best possible efforts to procure the No Objection Certificate (NOC) from the state's Pollution Control Board.

The Impacts

The POSCO project with its different components will have a range of social and environmental impacts. To list a few:

1. The Steel Plant and Port - Erasama Block, Kujang Tehsil, Jagatsinghpur district

Located about 10 kilometres from the famous Paradip port, the proposed plant and port area would affect 3 gram panchayats of the Erasama block. These include 7 revenue villages with 11 hamlets. While the official figure of the number of families being affected is quoted as "upto 400", according to the local leaders of the movement against the POSCO project, the entire population of 22000 will be affected by the project, due to displacement of livelihoods based on a thriving agricultural economy. Apart from paddy cultivation, the most critical livelihood support is provided by the cultivation of paan or betel leaf. Abhay Sahoo, a local CPI leader of and several other local cultivators say that betel leaf crops are a substantive source of income for the people, generating income in lakhs of rupees. This is corroborated by a detailed field investigation on the matter. In addition, cashew nut cultivation and pisciculture (fish breeding) are other important livelihood sources for the people of the area.

Beetleleaf cultivation in the area which will be affected by POSCO's operations. Pic: Manshi Asher.

The proposed port at Jatadhari (Estuarine region of Ersamma) would also directly displace the livelihoods of several fishing communities as the Jatadhari estuary serves as a spawning and breeding ground for several species of fish. It will also cause irreversible damage to the coastline. The port activities will include construction of jetties and extensive dredging in areas which are currently fishing grounds for the people of the area, and will therefore impact the entire coastal ecosystem of the region. Furthermore, one of the most prime issues has been the threat to the nesting habitat of the endangered Olive Ridley turtle as a result of this project. Several conservationists have pointed out that if the port is allowed to come up, it will adversely affect the turtle nesting beaches in the Gahirmatha Marine Sanctuary where nearly 400,000 Olive Ridley species come every year for nesting.

2. The proposed Mining area - Khandadhar Hills, Keonjhar district

Keonjhar is located in the North of the state of Orissa, bordering Jharkhand state. It has the largest iron ore mines in Asia and would supply the colossal amounts of iron ore required to production of steel for POSCO. All the iron ore mines in the district are open field mines and thus the landscape is covered with huge heaps of soil dug out for the mining, which are and left that way once the ore is finished. The roadsides are piled up with slag as well as other solid waste from the sponge iron plants. The Khandadhar hills in Bansapal block, where POSCO is proposed to be allotted the mines spread over 6000 hectares is prime forest area. These forests are inhabited by a wide variety of wildlife and as well as flora.

Furthermore, the tribal communities which form 74 per cent of the population in the surrounding area are completely dependent on these forests for fuel, fodder, fruits and medicinal plants. The water springs in the area provide water for drinking as well as irrigation. The mining would also affect the famous Khandadhar waterfall - which is also a famous tourist destination of the state. The area from where the waterfall originates -- the Khandadhar Hill range -- is proposed to be mined.

Environment and forest clearances

Were all these impacts assessed and evaluated during the clearance process?

All of the above mentioned components of the project are linked to each other, and are part of one large project. All the components require to mandatorily go through the process of seeking separate environment and forest clearance from the Ministry of Environment and Forests (MoEF). Not surprisingly, the grant of environment clearance of the port and steel plant components has also been ridden with controversy and protest.

Though in-principle approval to the SEZ proposal of POSCO was given way back in Oct 2006, the project has not come up for Formal approval at the Board of Approvals of the Union Ministry of Commerce. This is because of the uncertainties on the ground. Because of the delay, POSCO began pursuing clearances of the mining, steel plant and port components of the project separately. POSCO made separate applications for environment clearance of the port and first phase of the steel plant. On 15 April 2007, a joint public hearing as per the Environment Impact Assessment (EIA) Notification was conducted for the captive port and first phase of the steel plant.

A week before the public hearing, 15 platoons of para military forces were deployed in Kujang, according to reports. Since the hearing was held more than 20 kms from the project affected panchayats, most people boycotted the hearing. It was also pointed out that the relevant documents were not available to the people in time. Affected people activists, wildlifers and others submitted written objections highlighting all of the above. Ironically, the minutes of the public hearing did not reflect the concerns raised; and a resolution has been passed by the local people clearly points that out. The resolution is a document in Oriya with several signatures of people from the affected panchayats.

As of today, environment clearances for the port and steel plant have been granted by the MoEF. What is most disturbing is the complete lack of insight by the MoEF, to consider the projects as a whole while assessing impacts. It is public knowledge that each of components of the project are linked. But the components were appraised by separate expert committees, and the cumulative impacts of the project were never assessed. This issue was repeatedly pointed out to the MoEF by people's support groups from Delhi, Chennai and Bhubaneshwar. But there was no response.

It is not known whether the forest clearance for the steel plant has been granted yet, though there is news that the proposal is pending before the MoEF. As for the mining, the company needs to sort out a larger legal tussle with Kudremukh Iron Ore Company Ltd (KIOCL), before jigsaw of the project fits in perfectly. KIOCL has claimed that Khandahar was an area originally allotted to them for the purpose of mining, following the closure of their operations in Karnataka.

Opposition in Jagatsinghpur

There has been opposition at the plant and port site from the very time the news about the project first spread in 2005. While there were mixed reactions initially, the threat of losing lands in return for nothing soon caught up with the communities. POSCO Pratirodh Sangarsh Samiti was formed at the local level and has been leading the struggle against POSCO till date. Through picketing of the POSCO local office, rallies and demonstrations and blocking off the area to all government and POSCO officials by setting up check posts, the project has been stalled for almost three years now.

While the actions of serving notices for land acquisition by the district administration were initiated as early as November 2005, all attempts of the local state and company officials were stalled once the area was barricaded for entry by the communities as a measure of protecting themselves. As a result of this no ground surveys have been carried out so far. In fact with the access to the area blocked off, it is a wonder how M N Dastur and Company (P) Ltd from Kolkatta did the mandatory Environment Impact Assessment (EIA). The report is dated January 2006. It was this EIA which formed the basis of granting the environment clearance to the project.

At the same time, the company and the state government have announced several incentives and schemes for alternative land, cash compensation, rehabilitation and so on, according to government officials as well as press reports. But there is no document available on the ground to support any of this.

POSCO has also announced that the Tata Institute of Social Sciences (TISS) has been engaged to carry out a Social Impact Assessment and help in formulation of a rehabilitation package for the communities. However, even the TISS researchers were not allowed to enter the area by those opposing the project.

The people are demanding a political dialogue with the chief minister Patnaik, but neither the chief minister nor any of the other senior ministers have attempted to dialogue with the local representatives. There have been instances of them creating conflict and filing false cases (almost 70 cases) against those opposing the project. There are also regular reports of violence from the villages.

POSCO's record

POSCO was established in April 1968 in Pohang city of South Korea by the then Korean President. It has two steel plants in South Korea at Pohang and Kwang Yang. By 1998, the South Korean government had reduced its stakes in POSCO to less than 20 per cent, and more than 50 per cent of the shares in POSCO were in the hands of foreign investors. POSCO was fully privatised in 2000. The company is today listed on the London and New York Stock exchange. In early 2007 the US based-Berkshire Hathaway (run by Warren Buffet) bought 4 per cent of POSCO's shares worth 570 billion dollars, increasing the outside (South Korea) stake in the company to 62 per cent.

POSCO's reputation in its home country is suspect. In July 2006, POSCO was in the headlines when almost 2000 workers of POSCO's subcontractors forced their way into the company's head-office building at Pohang and staged a week-long sit in there. Led by the regional union, the workers were demanding higher wages and better working conditions. The company refused to accept the responsibility for the labour problems saying that they were not liable towards sub-contracted workers. (

This was not the first time in South Korea that labour exploitation has come up as an issue. The take over of Sammi Special Steel, another steel company, by POSCO where the company management ignored the collective agreement to selectively rehire part of Sammi workers for more than 10 years. In protest of the unfair treatment by POSCO management, 200 Sammi workers have carried out a struggle for their reinstatement for more than 3 years. Details of this are available on the website Further, South Korean organizations like Friends of the Earth Korea and the Korean Federation for Environmental Movement have tagged POSCO as the "Largest but worst, respected polluter".

What Next?

Things are quiet on the POSCO front in Orissa today. The company and the state government issue regular media statements claiming that the project is going as planned. But there appears to be no move to begin construction by POSCO on the ground. While there is no indication of the struggle against POSCO intensifying either, the current situation is not necessarily a sign of peace but rather of deep tension.

But with the Orissa government and the Prime Minister's Office in full support of this venture, a lot more may yet unfold in the coming days. If the concerns of the local people are not resolved, conflict may remain the underlying theme, with the poorest losing out their only resources in the end. Going by what has transpired so far, that's a price that the state government appears to be willing to pay to fuel the growth rate to the 9 per cent mark.