Steeling a march, finally PDF Print E-mail
Wednesday, 04 May 2011 00:00
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 On the face of things, there is no relationship between the final forest clearance given to Posco’s 12 mntpa plant and the 50 bps hike in policy rates by RBI. Yet, there is a deep relation. The main reason for RBI’s rate hike is runaway inflation, moving now to even manufactured products—as this newspaper has been arguing for months, manufactured inflation is largely a function of capacity; raise capacity and it slows, keep capacity constrained and it rises. In the case of Posco, yesterday’s final clearance from the Centre (the project still has to acquire the land!) comes just under six years after Posco and the Orissa government first signed the MoU in 2005. Had clearances been granted in time, 4-8 mn tonnes of capacity would already be on stream today. Add to Posco’s delays, the delays in a host of other projects, and you see this is an important reason for why manufactured inflation is rising the way it is—as FE’s Oped columnist Mahesh Vyas pointed out yesterday, the average value of new investments announcement in the past three quarters, at R3 trillion per quarter, is nearly half the R5.8 trillion per quarter average in the preceding three quarters. Today’s clearance, like the one given in January, does have some riders—it says no ore should be exported from India—but they are largely cosmetic. In even the earlier plan, Posco wasn’t exporting ore, it was swapping some exports for better quality imported ore—this is now redundant with Posco deciding to change its technology, which will ensure the plant can now use the higher aluminium content ore from India.


While we welcome yesterday’s clearance, the manner in which clearances are allowed to get derailed is worrying. In October, one set of experts talked of “about 70% area of the forest land is covered with various kinds of forest and trees” and cited the presence of STs whose interests were being compromised. This derailed permissions and the ministry didn’t pay attention to the report of the other expert, a former environment secretary, which said the area was not one where STs were traditionally found and that the forest was “mainly sandy waste, with some scrub forest”. In January, the environment ministry admitted the first set of experts were biased when it said “the Posco project site is not part of a Fifth Schedule Area (where tribals are found)”. The project then got held up as the ministry was told the claims of two villages had not been settled. While giving the final forest clearance, environment minister Jairam Ramesh has recorded what the Orissa government had been saying all along, that the resolutions of the gram panchayat were fake—the facts, Jairam has written, “are too obvious to require any further enquiry or verification”. And yet the project, and many others, keep getting derailed on one pretext or another.


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