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Jindal Steel betrays Salboni's poor farmers

August 08, 2014 09:07 IST

JSW Bengal Steel, which was supposed to change the lives of people in the region, has been stuck for years with both the govt and JSW accusing each other for the delay.

In early June, a crowd milled around the iron gates leading to the site for Sajjan Jindal-controlled JSW Steel's steel and power project at Salboni in West Medinipur.

They were there because the dream of a better life, promised to them when they ceded their land to the company in 2007, had remained unfulfilled seven years later. 

They met the general manager of the site and demanded that JSW Steel fulfil the commitments it had made to the landowners and, in the meantime, pay them an honourarium. 

Dilip Mahato, 40, was one of the agitators. He had been promised not only compensation for his land, but also employment at either the 10-million tonne JSW Bengal Steel plant or the 1,600 Mw power project, which were supposed to come up in the area.

He had, therefore, readily given up his five bighas (around 1.5 acre) of land. He has waited all these years for the projects to start, but has been left frustrated. Like him, Chief Minister Mamata Banerjee too decided enough was enough and warned JSW Steel on July 14 that the state would reclaim the 4,300 acres given to it if it did not begin work on the project. 

Since neither Mahato nor the others in Salboni who gave up their farm land made much money from their fields - in a good year, they earned just a measly Rs 3,000 from cashew - they had big expectation from JSW Steel's rehabilitation package that comprised cash compensation, employment for at least one person per family whose land was acquired and free shares in the company equivalent to the price of the land they had surrendered. 

Not that there hasn't been any work at the site. A 30-acre mini township called Ankur has come up.

Around 1,000 locals found temporary employment in constructing the residential complex - built to house people who would be employed in the upcoming plants. 

Jaideb Mahato, 19, had even gone for training there in the hope of qualifying for a job at the new facilities. That hope was dashed eight months ago when the training stopped. Shortly after, work at the site also stopped, claims Jaideb. 

Banerjee has asked JSW Steel to pay Rs 4,500 a month to families from whom it had acquired land. "The locals were paid Rs 150-200 a day for construction work at Ankur," says Dilip Mahato. "That is the only work we ever got under JSW Steel. But that too has stopped." 

Only coal, no iron

Immediately after assuming charge as chief minister in 2011, Banerjee had publicly expressed her disapproval at the delay in the project in her first meeting with investors. JSW Steel had concluded the agreement on the project with Banerjee's predecessor, Buddhadeb Bhattacharjee, and it was the Marxist chief minister who, along with the then steel minister Ram Vilas Paswan, had laid the foundation stone for the Rs 35,000-crore JSW Bengal Steel project in 2008. 

But after the regime change, it was found that the company had not signed a lease agreement with the state government despite possessing legally permissible land at Salboni.

The West Bengal Industrial Development Corporation, which had acquired 189 acres for the project, pointed out that the company had not obtained clearance from the land reforms department for the private land that it had acquired.

This required what is called a "14Y" exemption that frees the buyer from the ceiling of 24 acres of purchasable land. The government resolved this by vesting the acquired land with itself and then leasing it to the company, thus paving the way for signing the lease agreement. 

However, to protect its interests, the new government insisted on a supplementary agreement that came with new safeguards.

It has not been signed still date. "It's not that the original development agreement did not have safeguard clauses, but the supplementary agreement had new ones," says a government official. 

While the state government has now declared that it would not be able to facilitate iron ore linkages, it also put a cap on water usage at the project and added timelines. 

The subject of iron ore has become a moot point. While the company did not respond to questions sent to it by Business Standard, its statement of July 15 in reponse to Banerjee's threat was: "We are committed to the Bengal project and have spent over Rs 600 crore. Unfortunately, iron ore which is the critical input for steel making is not made available to steel companies which are set up after liberalisation for value addition within India. Instead, India granted mining concession to merchant miners encouraging export of iron ore and import of steel." 

The company release further said: "Compounding the problem, iron ore-bearing states were now restraining the supply of iron ore to other states threatening the survival of steel companies there. In these circumstances, JSW Steel requested the West Bengal government to facilitate long-term supply of iron ore to take up active implementation of its project."

The state government, however, has a different version of the story. A senior minister says: "They are not interested in this project. They keep talking about iron ore, but that is not the state's problem." Government officials too are baffled as the state does not have iron ore. "How can we facilitate linkages?" they ask. 

Earlier, JSW Steel had similarly alarmed the government by proposing that it be allowed to use coal from its allocated mines- two non-coking and one coking - for its Bellary project since the steel plant at Salboni was still a long way off. 

"We made it very clear that the coal mines were allocated through the state dispensation route and could not be routed to Bellary. Our hunch was that the company was only interested in the coal mines," says a government official. 

The coking coal mine was meant for the steel plant. The non-coking coal was to be used for the captive power plant. Any surplus power, according to the development agreement, had to be sold to the West Bengal State Electricity Board under a power purchase agreement. 

The captive power plant was to be set up jointly by JSW Steel and JSW Energy. The draft red herring prospectus for JSW Energy mentioned that the power plant with two units, each with a capacity for 800 Mw, was to be developed by a special purpose vehicle in which JSW Steel would have a 26 per cent and JSW Energy 74 per cent ownership interest. JSW Energy's IPO was launched in December 2009.

By the third quarter of 2011, however, JSW Energy exited its interest in the coal mines in favour of JSW Bengal Steel. 

The Mahatos at Salboni don't understand the nitty-gritty of fuel linkages, and company officials are not available for clarifications. They also have despaired of ever being able to realise the shares in JSW Bengal Steel; they now want to be given cash equivalent of the shares.

"The shares were supposed to have been kept in a trust under the jurisdiction of the district magistrate. But the district magistrate has advised us to visit the JSW Steel office in Kolkata," say representatives of the land owners. 

In 2007, this innovative model of allocating shares to land owners had sent ripples across the country. Economists and politicians had touted it as the only way of capturing the future value of the land. The model also was Sajjan Jindal's pride, and he wanted to replicate it in all his greenfield projects. 

Ironically, at the peak of the agitation against Tata Motors' Nano project at Singur, Jindal had sympathised with the land owners. "I am a farmer's son. I can understand," he said. Today, that seems like an echo from a long-gone era.

Ishita Ayan Dutt in Kolkata