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Major obstacles to metal sector's growth

Investment over the next ten years in steel, aluminium sectors is estimated at $50 b

ENVIRONMENTAL THREAT?: A conveyer system through forest areas in Orissa to carry bauxite to National Aluminium Company's (NALCO) alumina refinery.

IN CONSONANCE with the projected average 7 to 8 per cent GDP growth rate targeted for the next decade, the country's metal production industry, particularly in steel and aluminium, is expected to grow at a blistering 10 per cent annually. If all the investment plans proposed in this sector are added up, the total sum comes to over $50 billion for the next ten years. However, a host of new factors are gaining ground which can become major obstacles in realising this growth.

Most of the nation's proven reserves of coal as well as ores of iron, aluminium, nickel, chromium, manganese and uranium are located in the three contiguous States of Orissa, Jharkhand and Chhattisgarh . A large percentage of the area of these States is covered by natural forests. These States also have a high proportion of tribals in their population who subsist on gathering forest produce as well as scratch farming. Most of the mineral reserves are located either in forested zones or in tribal areas.

In the early years after Independence, these tribals were innocent and it was relatively simple to coax and cajole them to give up their land for mines and industrial projects by offering some monetary compensation. Also, in those days environmental regulations were either non-existent or minimal. So, the initial round of metal extraction projects, such as the Government-owned Rourkela Steel Plant could be established without much social fuss.

The circumstances are vastly different today. Educated by well-funded non governmental organisations (NGOs) and activists, the tribals are no longer easily manipulated and dig in their heels about moving out of their ancestral habitats.

Naxalite threat

In several districts, the leadership of the locals has been usurped by naxalites who do not recognise state authority. The clout of these insurgents is growing exponentially in these three States and in many regions it is their writ that runs now, not that of the government. One such naxalite infested area is Dantewara district in Chhattisgarh State, home to the famous Bailadila iron ore deposits, with proven reserves of over 300 million tonnes of over 60 per cent grade. Recently, naxalites in this district blasted a railway track used to transport iron ore from Bailadila to Vizag port for export. The present situation can be exemplified by a case that has now become legendary. In 1993, the Orissa Government granted a lease to Utkal Alumina International Ltd., promoted by Indian Aluminium, the Tata Group, Hydro of Norway and Alcan of Canada, for the extraction of bauxite through open-cast mining to feed a one million tonne alumina refinery. The project ran into opposition from organised local groups who feared displacement and environmental degradation. On December 16, 2000, policemen deployed at the site of the project had to open fire on an aggressive crowd of protesters. Three persons died. That project has never got off the ground.

More recently, in January this year, 12 persons died when the police had to fire on a rampaging mob of tribal land owners at the Kalinga Nagar industrial area in Jeypore district of Orissa. The tribals were agitating against the erection of a boundary wall around the land allotted to Tata Steel by the State government for the company's proposed six million tonnes integrated steel plant. Their grouse was that the compensation offered by the State government for acquiring their land was insufficient. Now it will be a miracle if the project is commissioned by 2008 as Tata Steel had hoped.

Stringent economies

On top of this, environmental legislation, particularly regarding mining in forested areas, has now become comprehensive and the courts are stringent about the implementation of the norms laid out in the law. The net result is a protracted process of getting clearances which can run into years. For example, SAIL's integrated steel plant at Bhilai will soon be running out of ore from its present iron ore mine. Yet, its attempts to get environmental clearance for a proposed new mine in the forest areas of Chhattisgarh have been stymied for the past five years.

With many NGOs setting themselves up as environmental watchdogs, companies these days cannot fudge or window dress their environment management figures with ease, as in the past. A case in point is the recent order by the Supreme Court to the Karnataka-based Kudremukh Iron Ore Co. Ltd. to cease mining in its leased area as it falls within a national park. The case against the company was initiated by a local NGO.

Politicians are Janus-faced about addressing these issues. While they would like industrial investment to pour in, they are also scared of alienating the tribals who form a considerable vote bank.

Under these circumstances, the prospect of mega projects for steel, aluminium and power generation proposed in the three States by POSCO, Lakshmi Mittal, Tata Steel, Larsen & Toubro, Vedanta Resources, NTPC, Reliance and many others going through on time appears dim.

N. N. SACHITANAND

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