Ground reality- Hindustan Times

Barun Mitra Barun Mitra
March 23, 2007
First Published: 00:35 IST(24/3/2007)
Last Updated: 00:47 IST(24/3/2007)


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Much has been written about the tragedy of Singur and Nandigram in West Bengal. Yet not much light has been shed on the real significance of the protests by farmers on land acquisition. Brand Buddhadeb has suffered a serious blow much beyond West Bengal. But, more importantly, an undercurrent of awareness is spreading through the grassroots of society on an almost unheralded issue — the protection of property rights.

Political and social activists have been hurling arguments to score points against rivals. If one side stresses on the need for industrialisation, the other calls for inclusive growth. The self-proclaimed champions of the poor are hobnobbing with big businesses, while the Opposition spectrum, from the fringe Left to the far Right, want to be seen to be siding with the rural poor. And business leaders, who have been enjoying the freedom to mobilise capital, want investment opportunities to be sugar-coated with a range of privileges and subsidies, including tax breaks and land at low costs.

Sixteen years after India began dismantling the licence and permit raj, it is clear that reforms have improved the economic environment for entrepreneurs. Yet, the issue of land acquisition in the name of promoting industrialisation or special economic zones (SEZs), shows how deeply entrenched the sense of political patronage continues to be in the influential sections of Indian society.

Nothing else can explain the desire of so many Indian business houses to ask the government to procure land for their projects. Since these businessmen have been the biggest beneficiary of liberalisation of the capital market, one could have expected them to demand a similar liberalisation of the land market in the country.

If businesses cannot legitimately acquire the necessary land for their purposes, then it is the land market that needs to be reformed. Instead, they have sought to eliminate the land market completely by asking the government to act as the middleman and perpetuate the land mafia.

Similarly, the opinion among social activists range from those who want land to perpetually remain under agriculture or forests, to others who focus more on an adequate rehabilitation and compensation package. Despite their concern for the poor, most of them fail to realise that property rights is not a luxury of the rich, but a necessity for the poor. The rich can survive in most societies, irrespective of their legal rights, because with their wealth they can buy protection from the powers that be. It is the poor who are left most vulnerable if they are denied the right, because they have no other recourse, except to become political pawns.

Economist Hernando de Soto, among others, has shown that the poor are trapped in poverty primarily because of their inability to capitalise on their assets, including land.

Today, Indian businesses can raise capital freely at home and abroad, they can buy and sell assets, engage in mega mergers and acquisitions. Yet, most Indian farmers hardly enjoy the freedom to buy, sell, lease or rent land. In most parts of India, farm land is regulated under land ceiling and land usage laws. In addition, laws make it difficult to even change crop patterns, and restrict the movement of agricultural produce.

The astronomical rise of real estate prices in urban India is also a reflection of the rigidities that have hobbled our cities. Rent control, land ceiling and zoning, coupled with weak legal avenues for the enforcement of contracts, have all made land in urban India artificially scarce. All — the land mafia, politicians, bureaucrats and businesses — have benefited, except the land owner himself.

Indians have been slowly, but steadily, surrendering the most fundamental of rights — the right to property — from almost the very inception of the Republic. Jawaharlal Nehru began the process with the creation of the Ninth Schedule in 1951, in an attempt to put land acquisition beyond the purview of judicial review. With her populist nationalisation, Indira Gandhi greatly diluted the scope of property rights protections. The first non-Congress government took one more step. In 1978, it amended the Constitution such that property rights no longer remained a fundamental right. Except a few brave voices, hardly anyone mourned the demise of the individual’s right to property.
The law is quite distinct from legislation. It is easy to write legislation that violates the spirit of the law as commonly understood. So the State passed legislations undermining basic principles of law in the name of helping the poor. First, land was sought to be confiscated from big landlords and redistributed to the poor. And now, the same land is being forcefully acquired through the use of eminent domain from the poor to be given over to large private investors.

Once a fundamental legal principle, that of property rights, is sacrificed, ‘might’ becomes right, and people are left vulnerable to the coercive power of the State. Since the communists in West Bengal lay their first claim to legitimacy on rural land distribution in the name of the landless, it is not surprising that they are now caught between a rock and a hard place as they try to facilitate land acquisition for the sake of industrialisation.

Yet, in the past two decades, there has been a steady and growing demand for greater recognition of private property rights in one form or another. Twenty years ago, at the height of the agitation against the Narmada dam, the issue was polarised between whether to build the dam, and the quality of the rehabilitation package for the people who lost their property. In the last few years, the tribal rights debate brought to the fore the issue of securing property rights for forest dwellers.

The violence over land acquisition in Orissa’s Kalinganagar two years ago, and the recent tragedy in Nandigram in West Bengal, mark more milestones on the long road to property rights. A couple of months ago, ministers in the West Bengal government asserted that under the land acquisition laws, consent of the landowner was not required. They would then go on to highlight the compensation and rehabilitation
packages. The law remains the same, but the protests in Singur and Nandigram have forced the state government to announce that no land will be acquired without consent.

A similar sentiment at the grassroots in urban India, following the demolitions and sealing drives is forcing the political establishment to recognise the potential political cost of the violation of property rights.

A momentum seems to be building from the grassroots. Property rights could be an issue that unites Bharat and India, the poor and the rich alike. The time seems ripe for a people’s campaign for the restoration of the right to property as a fundamental right. This would empower the people and unleash the much-needed second generation reforms by including all sections of society into the growth path. The tragedy at Nandigram will not be wasted if the country joins hands for a campaign to restore property rights.

Barun Mitra is the director of Liberty Institute, an independent think tank in Delhi

MEMORANDUM OF UNDERSTANDING BETWEEN THE GOVERNMENT OF ORISSA AND THE ________________ ORISSA

Column by Jayprkash Narayan SEZs and stakes for all
================================

The government＊s announcement of a review of the policy on rehabilitation
of land-losers in SEZs indicates the complexity and contention involved in
land utilisation and industrialisation in a densely-populated, poor country
like India.
Two major criticisms have been levelled about the prevalent SEZ policy. By
the first, the government should change the overall policy and legal
environment to promote economic activity, instead of creating islands free
from regulatory obstacles. This is a valid point in principle. But in a vast
and diverse democracy, changing the policy and legal environment for the
whole country is easier said than done. Such far-reaching changes, however
desirable, are time-consuming, and involve painstaking negotiations and
long-term engagement to build a consensus. Therefore, using the investment
in SEZs as a short-term economic booster is a sensible policy tool, provided
it presages a long-term change in the investment climate.



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The second criticism is that the incentives offered are excessive and
inequitable, and will entail revenue losses. A closer examination shows that
SEZ incentives are largely the same as those available to export-oriented
units. The one exception is that SEZ units can participate in trading
activities. It makes sense that these economic incentives should be uniform
throughout the country, while other policy/regulatory incentives will, of
necessity, be applicable to notified SEZs for the time being. The loss of
revenue on tax-incentives is notional, and the argument that the additional
investment growth and jobs will more than offset this loss is reasonable.

In addition to these, there are five operational issues which need to be
addressed. First, what kind of land should be acquired for SEZs? The
government policy is both fair and reasonable. The government says that
mainly waste land and, if necessary, single crop agricultural land alone
should be acquired. Location-specific industries (port-based, for example)
may sometimes require valuable agricultural land. Otherwise, the stated
policy should be strictly enforced. The claim that loss of cultivable land
will undermine food security is exaggerated. Conversion of 100,000 hectares
of land, or even more, would reduce farm land by less that 0.1%. With the
decline in share of agriculture in GDP, greater industrialisation and shift
of occupations are both necessary and inevitable. India cannot continue to
be a largely agrarian economy if we harbour ambitions of rapid economic
growth and global power status.

Second, should land for SEZs be bought on market principles or acquired by
compulsion through state power? The land acquisition law and past precedents
do permit the state to acquire land for a company for a ＆public purpose＊,
and industrial growth does qualify as such. But it is preferable to
encourage private purchase through market mechanisms including negotiations
and bidding. However, there are occasions which warrant state intervention.
For instance, a recalcitrant owner of one critical but small piece of land
can thwart the whole project by demanding an abnormal price or refusing to
sell. In such cases, land acquisition may be the last resort, and even then,
the price should be fixed through negotiations rather than depending on
earlier registered sales deeds (declared sale prices are often undervalued).

Third, how do we ensure that land losers have stakes in SEZs?


With the huge real estate boom, even 10-20% of the land would fetch the
owner multiple returns relative to the original compensation

Mere ＆compensation＊ at current market prices is insufficient if the asset
value could appreciate significantly. Land losers suffer the heartburn of
relative deprivation as values skyrocket, and their neighbours benefit from
their sacrifice.

One elegant and equitable solution would be to treat part of the land as
equity in the project. In addition to the normal compensation, the land
owner could have right of owning a part of the developed land in the SEZ.
This could be about 10% in industrial projects, and 20% in infrastructure
projects. With the huge real estate boom, even 10-20% of the land would
fetch the owner multiple returns relative to the original compensation. Such
equity stakes will make SEZs attractive to the land losers.

Fourth, displaced people need to be imparted with skills that could have
them absorbed in these SEZ projects. There exist successful precedents. In
1985-86, a massive project was undertaken to train 8,000 youngsters from the
displaced families of the Visakhapatnam Steel Project, and all of them are
now productively employed. It took some effort, of course. A national
programme of training unemployed youth in India is overdue in any case, and
SEZs should be the starting point. Once SEZs provide local employment, much
of the resistance will disappear.

Finally, how do we integrate SEZs in the local governments, even as their
autonomy is assured? In AP, in 1996, the industrial infrastructure
corporation created a viable and successful model. Local entrepreneurs were
handed over the management of the industrial estate, and were given the
authority to raise service charges (＆taxes＊) from the units/plots in the
area. An agreement that was struck between the local government and the
industrial estate transferred 30% of the taxes raised to the municipality.
In effect, the industrial township subsidised the municipality, while
quality of services and local autonomy stayed intact. Such an innovation
would be ideal for SEZs.

There are bound to be some losers in any growth process. But with
sensitivity, openness and innovation, we can grant stakes in growth to all.

〞The author is coordinator of Voteindia; Email: loksatta@satyam.net.in

Do you have enough water to provide for the needs of all the steel plants already under construction ?

Digvijay Singh
General Secretary, AICC
Dear Sachi ,
You have already taken opinion of eminent people from such diverse background that I don't think I would be able to contribute anything new but nevertheless shall flag certain issues which should be considered to arrive at decision.

1- Orissa Government has already commited its Iron resource to so many people I don't know whether they would be able to give
Poscoe what they want.

2- Orissa already has water problem. Do you have enough water to provide for the needs of all the steel plants already under construction ?

3- Iron reserves alloted to Poscoe, are they disturbing the ecology of the area and and the tribals and other land oustees who would be displaced whether they are land owners or encroachers what plans the Govt has for their sustainable livelihood ?

4- SEZ is based on the principle of getting private investment in setting up world class infrastructure for several investors in Industry as a group in a cluster rather than a stand alone industry.

5- If they are given tax concessions which they would get after they get SEZ status won't it deny a level playing for the other investors in greenfield steel projects ?

6- What are the plans of the investor and the Govt to draw up training program for the human resource requirement for local recruitment ?

7- Looking to the future requirement of Steel investors would come to Orissa in any case so why give liberal tax concessions which would deny revenue to the State ?

I don't have the relevant data to comment specifically on the issues which I have raised but if I was the CM I would take a decision based on above issues and make the agreement public.
With regards,
Digvijaya

Why should Government step in to make millionaires billionaires while Government does not step in that effectively to raise BPLs to APLs? ,argues Mr Sahadeva Sahoo, Former Chief Secretary, Government of Orissa

Dear Sachi, I was hesitant to air my views on PSCO & SEZ. I want growth but not of the top 10% only. Here are some of my observations.

POSCO & SEZ

Let me state my position on foreign investments. I want outside funds to propel the country's growth, but I also want people to benefit proportionately. Our people consider land as capital in a sense much more pronounced than what money means to the investors.
Can we find a way to enrich the oustees at the rate of growth commensurate with the rate of growth of the industry for which they forego their lands? One way is to allow them a share in the industry's investment and therefore a return on the value of land they surrender
to the industry. Employment potential for the emplyables among the oustees is almost nil in the new technology-driven production. Therefore profit sharing is the treatment of choice. Mahathir Mohammad of Malaysia enforced a percentage of shares ( perhaps
25%) of the ousting company to be reserved for the oustees who were given compensation for land lost partly in form of cash and balance in form of shares in the company. Oustees were free to choose percentage of shares they would purchase. Even if the industry
collapsed they would get a proportionate return on sale of the sick industry.

(1) Opportunity cost to the State

There is a competition among the states to woo as much Investment (be it FDI or domestic capital) as possible. Against this background we consider the case of POSCO. If Orissa leaves POSCO other states would grab it.Have not you noticed the envy in the eyes of other
states, particularly West Bengal when the news spread that Orissa bagged the largest ever FDI via POSCO. If we oppose POSCO, Orissa would not only lose the largest FDI but also credibility as a state which cannot keep its commitment to investors. Mind it,
this FDI is much beneficial to the Govt. of India as its forex reserve goes up by $ 1 billion and domestic MNCs like TATA can/could use the surplus forex to buy foreign companies and make us proud of reverse colonialism.

(2) Opportunity cost to the people.

If there is an industry, people beneft in myriad ways. Those who have no initiative would in any case be the losers. The less educated would join the service sector. The enterprise would have to provide for better health facilities in the area and sponsor or run education and training facilities for the children of oustees. In a democracy how long can an enterprise ignore the demands of the local people?

(3) Corporate Social Responsibility (CSR)

Education and health should be free for the oustee families while non-oustees pay for it at Government rates. MOUs provide for encouragement of ancillaries for eventual employment in the Company or its supporting facilities like maintenance of roads,
parks, ports, etc. allied industries (nonoustees to pay for education and training as per Government norms.) CSR must cover the area development in infrastructure, health and education for the people at the cost of the Company. (Infosys has paid to the Karnataka
Government Rs.600 crores to improve the roads and water supply in Bangalore as people including the Devegouda sr. demanded that IT industries compensate the wear and tear on infrastructure).

SPECIAL ECONOMIC ZONE

While FDI is no liability on the state's citizens, liberalized corporate investments are a burden on the citizens. SEZ may be FDI or domestic investments. It is an American Capitalist invention that allows trading in Shares without any assurance to the share holder on the security of his/her money. Obviously the corporate sector is obliged to pay heavily to the politicians and political Party. Companies are allowed to float and trade shares at a much higher price, sometimes twenty times the face value of the share while share holder gets a written receipt for Rs.10 only per share. Co.s do not pay tax as ordinary people pay on any additional earning they make whereas were
the State make a public borrowing it has to commit to pay back the principal along with an assured interest and inspite of such assured return the intellectuals would upbraid the government for increasing per capita loan liability of the state. Co.s make free money at
the cost of the citizens. What they pay to their Executives is not salary, it is compensation. Compensation includes some payment in the form of shares. If you and I get any extra payment over and above our salary the IT department would on our neck and count every paisa but in case of corporate compensation package additional payment in shape of shares is tax free. If companies get so much free money as their capital at the cost of citizens should they not spend adequately in the area of their operation for the improvement in the quality of life? Which means (1) education and skill improvement (2) medical care and public health (3) roads and markets for transport of
local produce (4) improvement and marketing of products of local artisans and all that as part of CSR, whatever may be the cost. They are substituting Government in their area of operation. SEZ is something more sinister. The area is an island of economic sovereignty. They are allowed to purchase from the hinterland without paying taxes and sell them abroad without paying customs and other duties which a normal exporter would pay. Local tax authorities and police/administration would keep their hands off.

Like some of our small scale industries if they blackmarket the raw materials would the Government tolerate? Why should they be tax havens? As happens in international borders unscrupulous elements with the support of political heavy weights would prosper at the borders of SEZ. If SEZ is an island independent of the Government let it be a patch of barren land.

Why should Government step in to make millionaires billionaires while Government does not step in that effectively to raise BPLs to APLs?

Sahadeva Sahoo

Suresh Prabhu

-------------------------
Land and the disputes
( Suresh Prabhu,MP
Former Union Minister, Government of India)

Singur is simmering. It's in national news for last more than a month. The acquisition of land for power projects like Dadri in UP or to house the Special Economic Zones in many states is facing similar opposition. Several development projects have not yet taken off owing to hurdles created by opponents of these projects in land acquisition. Now, is this only a problem created by illiterate farmers instigated by shortsighted politicians and supported by ill informed public? Or is the problem much deeper and thus needs more application of mind of our macro planners?

India has only 2.2% of the land mass of the world. This landmass caters to the country's burgeoning population, which constitutes almost 16% of the global population... The need of the hour therefore, is to plan all our developmental projects keeping this reality in mind. In other words one needs to take a holistic approach while planning such projects to avoid lopsided development. Individual ministries at the centre plan for their own projects for irrigation, power generation, roads, housing, industry, etc. State governments again have similar activities going on in all these and many more sectors.

The Government of India (GOI) had appointed a commission under chairmanship of Justice Kripal to suggest the means of attaining 33% forest cover for India. This has been our country's national goal for a long time. The report has already been submitted. To ensure ecological security, if we really want to attain this much cherished goal, we are left with only 2/3 rd of the 2.2% land for using it for other purposes.

India's population is likely to be 1.5 to 1.8 billion by 2050 depending upon our success in family planning. It means in the next 4 decades or so we need more land to harbor at least 50% more people than what we have today. It is a different matter that the increase in population will not bring about a corresponding augmentation of the finite natural capital like water and land. Indeed, the development is likely to drastically reduce our natural resources on per capita basis. This is reality and this should provide enough fodder to subscribers of the school of opinion that India will reap rich harvest in years to come due to "demographic dividends" its younger population is likely to offer.

GOI must use satellite imagery; Geographical Information System (GIS) type sophisticated tools for 'land use pattern analysis' that is to decide what landmass should be reserved for what purpose. After having demarcated the forest land boundaries, remainder should be classified as cultivable and non-cultivable land. As far as possible, industry, housing, irrigation, power projects should be housed only on a terrain, which is not suitable for cultivation. Further analysis thus needs to be done to classify cultivable land then as suitable for a particular crop. The cropping pattern should be decided on the basis of this as well as the agro-climatic conditions to ensure better yield; optimum use of water based on land and climate and food security. This system may in a way, address our water stressed issues.

Our development is indeed lopsided. While on one hand we are planning new irrigation projects, on the other hand we are diverting already irrigated land for non-agricultural purposes. Shortsightedness of our policymakers has already resulted in a large mass of land having been allocated for a purpose not necessarily compatible with the best suitable and desirable use. Since such large chunks of land have already been occupied, under the circumstances, the best possible solution that GOI may seek to ameliorate this condition, is to devise a scheme of incentives and dis- incentives for an ideal switch over of land use.

We also need to ensure that we have proper siting laws to ensure scientific planning of our landmass for a variety of activities. The society may demand certain activities for modernization and growth. These may cause pollution of some type but still required for meeting our daily needs. However, through better planning such activities could be located at a place where it could cause least damage to our natural resources, thus minimizing its adverse impact on the environment. We also must have a second look at laws of land acquisition, compensation etc.

Our track record in the department of Rehabilitation and Resettlement (R & R) is deplorable, to put it mildly. We need to change the way we handle R&R... The Project Implementing Agency (PIA) must set up a Special Purpose Vehicle (SPV) to handle R&R issues. The full cost of R&R, as calculated by a judicial or quasi judicial committee, must be handed over to this SPV before commencement of any project work by PIA. The SPV should be manned by some NGOs enjoying the confidence of Project Affected Persons (PAP) and thus should be free from PIA, which as the past experience shows, looses interest in R&R and PAPs as soon as it obtains permission to start their core work. The dedicated SPV will address this issue and the engagement of civil society will at least to some extent, reduce possibility of corruption. Use of Information Technology (IT) can reduce this possibility further by bringing in more transparency.

The planners must take land and water as limiting factors and build our plan around these resources. States should be taken on board and necessary incentives could be offered to them to ensure this. The message of Singur is better panning at national level of these macro issues and not fault finding with those who agitate.

LETTER FROM MR. JUAL ORAM TO MR. NAVEEN PATNAIK
A number of news items have come up in the media in the recent past
regarding POSCO and our statements have found place in these news. The
opponents of our alliance have got certain encouragement on the POSCO issue
for which I personally feel sorry. I want to convey my views through this
letter it is my personal capacity as well as the President of BJP State Unit
for strengthening the alliance and at the same time I would expect that you
would also try to strengthen the BJD-BJP alliance in the State.

I whole-heartedly welcome the investment of POSCO, through this letter and
support the decision of the Government. But I want some clarifications
regarding signing of the MoU with POSCO. I hope that as the Chief Minister
of the State you will personally intervene and clarify the points for the
healthy continuance of the alliance in the interest of the State.

It has been mentioned in the MoU that Indian iron are contains more alumina
for which 30% of the ore will be exported and an equal amount of ore will be
imported from Brazil having less alumina contain so that high quality steel
can be produced. Here my question is from which country iron ore has been
imported so for production of steel in India?
So far as my knowledge goes, iron ore was not imported from any country to
India for production of steel. On the other hand, iron ore has been exported
to the countries like China, Japan, and South Korea. It would not be out of
place mention here that if POSCO was getting iron ore having less alumina
content in Brazil, then it would not have been interested in setting up of a
steel plant in India and in particular, Orissa.

The second question is that before signing of the MoU, Govt. of Orissa
should have ascertained if the Government of Brazil has given its consent
for export of 30% of Iron Ore from their country, before agreeing to allow
export of equal quantity of ore from Orissa. The consent letter should have
been produced to the Government of Orissa by POSCO. In addition Government
of Orissa should have ascertained the terms and conditions of POSCO
agreement for conducting business with Brazil. As stated in the letter
written by Sri Braja Kishore Tripathy, former Minister of Steel, Government
of India and the leader of your party in Lok Sabha, I understand Brazil has
imposed a condition for selling iron ore to POSCO which is at market rate
due to which POSCO withdrew from Brazil, and expressed its interest to set
up a Plant in India. Therefore the factual position and the provision made
in this regard in the MoU should be clearly spelt out with regard to Import
and export of the ore.

My third question is whether any foreign company has so far been sanctioned
any mining lease. Is there any precedent? You as the popular Chief Minister
of Orissa have proposed in the MoU that mining lease will be sanctioned in
favor of POSCO. The Company sanctioned with mining lease will pay Rs.50 to
Rs.100/- towards royalty to Government per tonne. That means for one tonne
of iron ore the Company will spend Rs.400/- to Rs.500/-. The Company after
getting lease will pay Rs.450/-to Rs.500/- per tonne of iron ore in toto. On
other hand, if the Company purchases iron ore from the open market, it has
to spend Rs.1500/- to Rs.1700/-per tonne. As the Chief Minister you should
try to generate more funds for the State. It is therefore that I wish to
draw your attention through this letter to rectify the wrong decisions which
it& has been taken by you.

The Govt. of Orissa, has already signed MoU with 36 companies prior to
signing the MoU with POSCO. These 36 companies in their respective MoUs have
been asked to purchase iron ore from either the Orissa Mining Corporation or
any private agencies for use in their steel plants. These 36 companies will
purchase iron ore at the market rate of Rs.1500-1700/-per tonne for running
their plants whereas POSCO will purchase it at the rate of Rs.450-500/- for
running its plant. This seems like an undue favor being shown to a foreign
company and a step-motherly attitude to indigenous companies. In light of
this I demand that POSCO should be treated at par with the indigenous
companies for purchase of iron ore and accordingly, the MoU should be
rectified.

After signing of the MoU with POSCO, through the media I learnt that Paradip
would be declared as the Special Economic Zone to facilitate the setting up
of the POSCO steel plant. As per the definition of Special Economic Zone no
tax can be imposed on import or export into the SEZ area. In addition you
also cannot impose sales tax and entry tax. Thus, Orissa will be debarred
from getting any revenue. Perhaps this has not been brought to your notice
by the senior officers of the Govt. .

It has been printed by the media that after setting up of the POSCO plant in
Orissa 13,000 persons will get direct employment and 35,000 persons indirect
employment. I would like to draw your kind attention to the website of POSCO
wherein it is mentioned that they have an employees strength of 19,000
persons for its entire production of 31 million tonnes of steel making
throughout the world.
The process through which POSCO produces steel is the most modern and
scientific, and for this process, the least manpower is required. Hence,
those who would serve there are normally skilled workers. On a rough
estimate, a maximum of 2500 to 3000 people will be employed in a Steel Plant
of POSCO size. The number of persons who are to be displaced is
approximately 40,000, the relief and rehabilitation measures will be
miniscule, and therefore will it be a logical to displace 40,000 persons at
the cost of providing jobs to 2500-3500 persons?

The IPR-2001 was amended on the eve of the MoU signing to favour POSCO, The
clause in the IPR that a company after investing 25% of its project cost
would be eligible for sanction of mining lease. But in case of POSCO, you
have changed it and agreed to give them mining rights prior to investment.
What was the fault of the 36 companies who have already put more than 25% of
their project cost for getting eligible to apply for mining lease? I hope
you will look into this issue.

As the former Minister of Steel, Government of India, you are aware that
indigenous steel making requires. 1.6 tones of iron ore for producing one
tonne steel. Then what is the reason for granting and recommending excess
iron ore reserves to POSCO? 70% steel producing companies of the country are
waiting for grant of mining lease including the 36 companies who have signed
MoUs with Orissa. But instead of their cases being considered, why is it
that POSCO is being given preferential treatment?

It seems that some senior officers who have misguided you in signing the MoU
with POSCO. For example, the project cost per tonne of steel produced by
these 36 companies has been shown to be more than POSCO. It was initially
known that the project cost would be Rs.39,000 crores but later on it has
been stated to be Rs.51,000 crores. I feel that through excessive media
propaganda that it is the largest Foreign Director Investment Project in
India, the attention of the people of the State has been diverted from the
main drawbacks in the MoU. That is why I feel it proper to mention to you
that there was a similar project "Enron" in Maharashtra which had inflated
its project' cost. The consequence of which is before the country today?

Many companies and individuals are coming forward to set up industries in
Orissa because they find in you a very capable and transparent Chief
Minister. The other reason for it can be ascribed to valuable mineral
wealth, water and energy, which are found aplenty here. Hence, as a personal
friend and well wisher, it is my responsibility and duty that you should not
get swayed by wrong advice, that POSCO is showing compassion to poor state
like Orissa. But it is my considered that POSCO has hatched strategy to look
the valuable mineral wealth of Orissa.

Initially, you were obtaining approval of cabinet before signing of any MoU
with Companies. So far as my knowledge goes, in the last three MoUs
including POSCO, you have not taken the Cabinet into confidence. The media
and political opponents have cited that the MoU have been signed in haste,
and the transparency that your Government is known for has been ignored.

However, as you have only signed the initial MoU, you have scope to consider
and having a re-look minutely into each and every clause at the time of
signing of final MoU keeping the larger interest of the State in mind and
maintaining transparency so that the image of our Government headed by you
is not tarnished.

POINTS TO BE CONSIDERED BEFORE ENTERING FINAL AGREEMENT WITH POSCO

1. Before signing the final agreement with POSCO of South Korea the
following points needs to be considered for the interest of the Orissa State
and for the greater interest of the nation.

2. What is the role of Union Government before signing the POSCO MOU towards
the various terms and condition. They must clear it because the Orissa
PCC-President first welcome the MOU after that he opposed the MOU. So what
is the correct stand of the Congress party they must clear it.

3. In which rule and the act the POSCO MOU will be governed. Whether mines
and minerals development and regulation act is applicable to this MOU ?
Whether any other law is also applicable to this MOU, what are those act and
regulation. If mines and minerals development regulation is applicable to
this MOU then what will be the nationality clause of that act whether this
clause will be amended ?

4. Wheather POSCO have entered a joint venture agreement with BHP Billiton
of Australia to get long term supply of IRONE ORE and the name of the joint
venture is POSCOMAC. Also the company have entered another joint venture
agreement with the Brazilian company CVRD to get long term supply of IRONE
ORE and the name of the company is KOBRASCO. What are the term and condition
of those joint venture agreement. Is there any SWAPING clauses in those
joint venture agreement in Australia and Brazil.

5. Up to which grade of Iron Ore the Union Commerce Ministry have allowed to
export ? Is it a fact that more than 64% of Iron Ore is not allowed to
export to any other country for the greater interest of our country. Whether
high grade of IRONE ORE which are not allowed .

6. How much iron, manganese, coal and other ore reserve (in million metric
ton) in India. Whether the mineral reserve (quantity wise and quality wise
reserve) are insufficient for future generation. America has huge reserve of
oil are they not trying to get from the other country ? For what reason they
are adopting this policy.

7. Government of Orissa have signed 36 MOU before signing with POSCO. How
many cases out of this 37 cases have been recommended by the state
government for granting mining lease to the Union Government ? Whether the
government of Orissa have assured the POSCO company in the MOU to
recommended mining lease after surrendering the lease hold of the state
owned ORISSA MINING CORPORATION, if yes which are those areas ?

8. Before sinning the MOU with POSCO whether Union Government have obtained
the Environmental Impact assessment study in and around the Paradeep area
where the 1999 super cyclone hit was the worse compared to that of other
part of costal area of Orissa state.

9. As per the answer given by the Union Steel Minister to an unstared
parliament question No-220 dt. 25/7/2005 the POSCO company is going to use
FINEX process in its proposed steel plant at Paradeep Orissa if that be the
case than why the company will be allowed to SWAP certain quantity of the
IRON ORE allotted to them because in FINEX process cheaper IRON ORE and low
ash non-cooking COAL will be used as feed stock which is plenty available in
India

10. Whether the project cost shown in the MOU of the POSCO company is in the
higher side compared to the project cost submitted by the other indigenous
company. Whether the POSCO company will also raise capital from the Indian
market if yes what is the amount ? Whether the Union Government has given
FDI clearance to this company detail if any ?

11. Whether it is a fact that NMDC, MMTC and GOA are supplying IRON ORE and
fines to the South Korean Company POSCO from the year 2000 till date from
Ballery-Hospet region of Karnataka. Whether POSCO have a along term contract
agreement with MMTC to supply IRON ORE lump which valid up to the year
ending 2006. What are the terms and conditions of this supply agreement.
Whether MMTC is supplying the iron ore at prevailing market rate ?

12. What are the chemical composition of the above supplied IRON ORE per
each shipment and what is the approximate quantity of IRON ORE supplied to
POSCO from the year 2000 to till the end if the financial year 2004-05.

13. Is it necessary to have a cotton field to have a textile mill or have a
sugarcane field to have a sugar mill, the answer is obviously "NO" it is not
necessary or mandatory. Like wise to have a still plant the mines is not
necessary and the vice-verse.