The Telegraph
Tuesday , July 15 , 2014
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Mamata warns Jindals in damage-control bid

Salboni, July 14: Chief minister Mamata Banerjee today spoke of setting up an alternative industry on the land earmarked since 2008 for the Jindals if they did not complete a steel-and-power project fast. She also asked the Jindal Group to pay a monthly allowance to land-losers till they get jobs.

The chief minister’s statement — construed by some as an “ultimatum” probably because of Mamata’s Singur past, although no alternative industry has yet been set up on the abandoned land that is stuck in a legal wrangle — was made at a public meeting at Salboni in West Midnapore.

Whether it is an ultimatum or not, the statement served to bring to the fore the pressure on the chief minister to deliver, her political compulsions after agreeing to tweak the original deal between the Jindals and the erstwhile Left dispensation, fundamental problems with the Bengal economy and a perception that existing investors can take for granted a government that can flaunt few trophies in its industry showcase.

“Land cannot be kept lying unused for an indefinite period. Either you complete the project fast or the government will try to set up some other industry here. Around 4,000 acres of land is not a matter of joke,” Mamata told a public meeting after distributing cycles to girls and opening buildings for three police stations.

“You have taken nearly 400 acres from various farmers. Since the plant is yet to come up, they have not got any jobs. Till the time they get a job, I am asking you to pay the landlosers a monthly compensation of Rs 5,000 each. Otherwise, the government will make arrangements,” she added. In Singur, the state government pays Rs 2,000 a month to around 3,500 “unwilling” land-losers.

Fewer than 500 families are awaiting jobs at the Salboni plant, which means the Jindals, if they agree to pay, need to set aside around Rs 3 crore a year until placements are given.

Asked, an official of JSW Steel said: “We shall await formal communication from the Bengal government before making a statement.” JSW Steel, owned by Sajjan Jindal, is the parent of JSW Bengal, the investor in the Salboni project.

Before Mamata made the statement, she had inaugurated a cement plant less than a kilometre away. The OCL plant was depending on the JSW project for slag, a waste product from steel plants that is used as a raw material to make cement, and has now decided to tap the Tatas in Jamshedpur and IISCO in Burnpur for supplies.

Last month, some land-losers had held demonstrations to protest the delay in setting up the Jindal project.

It is not clear whether the two factors were playing on the chief minister’s mind when she delivered the speech today.

But the Jindal project has a chequered history, although it is yet to be born.

The project was originally conceived as a steel unit when the Left was in power. The problem is Bengal does not have iron ore — the key raw material for steel. The Left government then offered an incentive: build a power plant also on the site, for which coal can be sourced from Bengal.

Mines are allocated by the Centre, not the state. The hurdle was scaled when a state-run mining corporation, which held the mining licences to two coal blocks in Bengal, entered into a mutually beneficial development deal with the Jindals.

Around this time, the global economic slowdown began to bite and steel no longer was that much in demand, compared with the heady days that preceded the Beijing Olympics of 2008 when China devoured a lot of the construction backbone.

The Jindals, probably feeling the pinch, began getting cold feet about the steel plant in Salboni. Red tape over last-mile clearances related to land was also a factor but not the decisive one.

The investors were then said to have sounded out the Left government on a proposal to first build the power plant — for the running of which coal was lying deep down in the two blocks in Bengal — and the steel plant later.

A catch here: power plants rarely make losses because some state or the other — not Bengal, though — is always hungry for more. But power plants are not as job-generating as steel plants are. Besides, the multiplier effect of a steel plant is much bigger than that of a power plant.

So, the Left government insisted that the power plant could not be built without the steel project being set up first.

Then May 2011 happened and the baton changed hands in Bengal. The Mamata government, carrying the Singur baggage, helped Jindal cut through the red tape on land after an initial delay.

It was around this time that the now-infamous “policy paralysis” of the UPA government set in and the Supreme Court came down hard on illegal mining. The mines spewing iron ore in Karnataka and several other places ground to a halt.

The Jindals, who have a steel plant in Karnataka, had to resort to ore imports to keep the southern plant running. Even now, the official stand of the Jindals on the Salboni steel project is that “as long-term linkages of iron ore supplies... are still in process, the project erection work is on slow pace”.

As the Jindals were dragging their feet on the steel plant, the power-first-steel-later model was again resurrected.

It is not clear who took the initiative: the Jindals or the new Bengal government. But it appears that unable to attract any big-ticket investor and eager to avoid another Singur-like exit, the Mamata government did not make a big issue of the switch in the sequence.

Sources said when the proposal “came up again”, the company agreed to “rework” the project and build the power plant first. Since the capacity was raised, fresh clearances are needed.

Besides, two key amendments in the old agreements are required to build the power plant ahead of the steel plant. The agreement with the West Bengal Mineral Development and Trading Corporation needs to alter the nature of the plant from captive power plant to independent power plant.

Similarly, an agreement between the Jindals and the West Bengal State Electricity Development Corporation under which the state-run unit will buy power from the plant needs to be changed. Both are awaiting cabinet approval.

The two changes are potentially controversial and the Left is unlikely to sit idle.

A unique “power” factor is also at play. Although Bengal agreed to buy power from the Jindals, the state does not need more electricity as industrial demand has not picked up as expected in the absence of fresh investments.

Even if the state needs power, the state government feels it should give priority to the NTPC, a public sector unit. The government is also said to be keen to buy power from another private generator.

So, the Jindals’ power is no longer a priority for the government, the sources said. But Mamata’s dilemma is that she needs to show a plant at the site without adding to the reputation of driving away investors — in this case a slow-moving one.

The Jindals will also have to make up their mind on how long they can play for time. Beyond a point, nothing is predictable in Bengal.