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BackYou are here: AnalysisOpinion Maoist Guerrillas and Tribal Rebels Threaten India's Industrial Boom


Maoist Guerrillas and Tribal Rebels Threaten India's Industrial Boom

Plans to develop the mineral wealth of the country could be derailed by Naxalites

When Tata Steel began building the country's third-biggest steel mill in a plot of the 5,000-hectare (13,000 acre) Kalinganagar industrial area in the dust bowl of eastern India this year, executives thought they would be welcomed.

After all, they reasoned, the company, with revenues of more than £3bn, was bringing development and jobs to one of India's poorest places. However, by the end of the day, the bulldozers had not moved an inch and 12 people lay dead after what appeared to be a pitched battle between locals, armed with axes and spades, and police who carried guns and tear gas.

Tata Steel, part of a leading Indian industrial conglomerate with a history of social projects, faced a troubling territorial issue: how to build a factory on land that its inhabitants, indigenous people, had refused to leave?

The new plant would produce 6m tonnes of steel a year - an industrial surge that would create much-needed jobs in Orissa, which declares more than half its population as living in poverty.

B Muthuraman, managing director of Tata Steel, said: "We are working with the local people. They do want schools, the water, [and] the development that the plant will bring. It is some other elements who caused the problems. The action has delayed [the plant at Kalinganagar] by months."

These "other elements" are now at the centre of a corporate debate over how to exploit resources in the mineral-rich but poverty-stricken tribal belt in India. Tata Steel would not say who the instigators in Kalinganagar were, only that they were "extremists".

What happened in Orissa, say many experts, could easily be replicated across India, where the same mix of tribal disaffection could bubble up into a series of peasant uprisings. A bigger danger is that holding sway over a vast area of India is an armed group of left-wing guerrillas, referred to as Naxalites, who see industrialisation as an unwanted intrusion and threaten a violent contest over rural lands.


When the Guardian visited Naxalite guerrillas deep in the forests of central India earlier this year, Gopanna Markam, a company commander of the People's Liberation Guerrilla Army, stressed that the "exploitation" needed to be stopped. "The government is bent upon taking out all the resources from this area and leaving the people nothing."

This is not a threat to take lightly. Naxalite bandhs or shutdowns in Jharkhand state, with rich deposits of iron ore and dolomite, have cost local steelmakers 60 days of lost work a year. Armed rebels have carried out several attacks in southern Chhattisgarh on the state-owned National Mineral Development Corporation iron-ore mine.

Coincidentally, it is post-Maoist China's surging economy that is driving global demand for raw materials and in India it is Maoist-inspired revolutionaries who seek to dent their supply.

The Naxalites, who follow a radical Maoist ideology, have waged a low-intensity guerrilla war against India for decades. They control 92,000 square kilometres (36,000 square miles) of the country, from Nepal to the southern state of Andhra Pradesh. This "red corridor" runs along some of India's poorest parts and through areas inhabited mainly by tribal peoples. In many places Naxalites have in effect become the state - running schools, digging wells and administering justice through "people's courts".

Although the movement has splintered many times in the 40 years since it began, a unified leadership emerged last year under the Communist Party of India (Maoist). The new party, with a 10,000-strong armed wing, was promptly banned. By April India's prime minister was calling the Naxalites the "single biggest internal security challenge ever faced by our country".

With $85bn (£46bn) of investment slated for mineral-rich India - including proposals from South Korea's Posco; the FTSE 100 mining firm Vedanta, which holds its annual meeting in London today, and the world's biggest steel company, Mittal Steel - financial analysts have begun to fret over the implications of trying to build an industry in the absence of the state.

The brokers CLSA said in a note last month: "Lack of policy initiatives and the inability to win over the tribals, the largest stakeholder in the hinterlands where the Maoists hold sway, means the Naxalite movement is becoming stronger." The report pointed out that Maoist violence in India had already claimed 374 lives in 500-odd attacks in the first six months of this year.

Anirudha Dutta, a senior investment analyst with CLSA, said the problem was trying to square industrial growth with decades of government indifference. "Kalinganagar was a manifestation of the same problem. Tribal people do not have the education to get jobs at these plants. They sell their land at government-determined prices and then end up working as contract labourers.


"This economic insecurity is a serious source of discontent and is being exploited by the Naxalites. Government has to take steps to solve this because industry cannot. You are talking of about $30bn of foreign investment here - it is a lot of money," said Mr Dutta.

However, some in industry are undeterred by gloomy predictions. JSW Steel, the flagship steel and power company of the OP Jindal group, is pressing ahead with plans for a 3,500 hectare plant in Jharkhand producing 10m tonnes of steel, despite threats to some potential investors from Maoists.

"The problems are not particular to India or mining," says Ravi Kastia, group executive president of Aditya Birla and chairman of the Confederation of Indian Industries' mining group. "In difficult geographies around the world we see the same problem. We have seen copper mines close in Indonesia and Chile because of similar issues. But the demand is still there and so will the investment."

Activist's challenge

Bratindi Jena, an Orissa activist, has travelled to Britain to challenge the head of Vedanta Resources at today's annual meeting. Vedanta is developing an $800m aluminium refinery in Orissa's Lanjigarh area under an agreement with the local government two years ago. It has been disrupted by clashes with local tribes, some of whom have been displaced. Vedanta says it has offered them accommodation, schooling and jobs. Ms Jena says: "There are a number of serious environmental and human rights concerns with this project that the company has so far failed to address."

Planned plants

Projects planned in tribal belt states with active Maoist presence

Investment ($m)


Texas Powergen, US (power plant, sponge iron) 1,207

Vedanta (aluminium smelter) 550


Tata Steel (steel plant) 10,109

Mittal Steel (steel plant) 8,696


Tata Steel (steel plant) 3,261

Posco (steel plant) 10,870

Vedanta (alumina refinery expansion) 800

Vedanta (aluminium smelter) 2,100

Mittal Steel (steel plant) 9,000

Source: CLSA


Buzzle, August 1, 2006