India - People's licence raj

It’s not that Tata Steel has not had a busy year, having concluded a multi-billion dollar acquisition, consolidated at least two smaller ones and in the process of signing or firming up a few smaller mining acquisitions.
And yet disappointment was writ large on B Muthuraman, the company’s managing director when I met him last week. “Not enough has been done for the steel industry in India,” he said, arguing that India has a long way to go in steel consumption from its current low levels and that self-reliance was a critical step in that direction. That in turn necessitated steel capacity to come up much faster than what it was.
Actually, it’s not about capacity coming up faster, it’s just not coming up. Take the case of Tata Steel’s own plans for three new plants. They are Kalinganagar, Orissa, 6 million tonnes (mt); Jharkhand (Seraikela), 12 mt; and Chhattisgarh (Jagdalpur), 5 mt. The beauty is that all three plans have remained mostly that, plans. Now a look at how long they’ve been in the making. The Jharkhand project MoU was signed with the state government in September 2005, Chhattisgarh in June 2005 and Orissa in, guess what, November 2004.
Amazingly, it’s only the old steel plant and works at Jamshedpur that continues to offer a safe manufacturing haven, so to speak. Tata Steel is increasing capacity steadily and will touch 10 mt by 2010, up from 5 mt now. That’s mostly it then, there is no place to grow further here.
Muthuraman refers to the period between the time Tata group founder Jamsetji Tata began producing steel at Jamshedpur in 1912 and the 1990s, in which total capacity created was just 2 mt, give or take. Of course this included the era where an application for expansion in steel capacity by 1 million tonnes was and had to be cleared as part of the Fourth Plan document in 1963!
Last month Steel Minister Ram Vilas Paswan outlined the industry’s ambitious target of going to 124 mt by 2012 from around 60 mt now. In the same breath, he admitted that many states did not have Rehabilitation & Resettlement (R&R) policies and that land acquisition and forest clearances were the biggest hurdles.
Actually, it’s the same story all over, whether steel or power. Almost every major industrial project in the country finds it easy to procure licences and permissions from the Centre and state governments. You can predict, more or less, how long it will take to get a Foreign Direct Investment (FDI) application through, where necessary, and then other permissions. And even, by hook or by crook, the dreaded environmental clearances.
But in the licence raj era, if that was the end of the problems, today it’s only the beginning. The most challenging task is to procure and secure what I would term the people’s licence. From land-owners, villagers, land sharks, interested parties, disinterested parties, the whole bunch. And while in the licence raj, you had to “manage” a few politicians and/or bureaucrats, now it’s a whole melting pot of amazingly diverse groups with multiple agendas, some pretty legit, some not. Tough luck.
Something has changed on the ground. The Tata Group is amongst those industrial houses which have taken great pains to engage the local environment without any real provocation. And by that I mean, the whole gamut of what is now called corporate social responsibility, imparting education, generating jobs, building a workforce, opportunities and so on.
Tata Steel has put money and, more importantly, effort into working with, for instance, the disadvantaged Santhal tribals of Jharkhand — from adult education, nourishing the local languages to creating commercial channels for local artisans. And I have seen enough on ground to conclude that it’s not a lip service effort, either. Many large business houses have similar initiatives.
But that has still not helped Tata Steel, Reliance Power, Tata Power, Posco or Tata Motors get a clean people’s licence in all their upcoming projects. Tata Motors has an exemplary vocational training and employment programme running in Pune for youngsters from the region. An attempt to replicate it at Singur in West Bengal around its Nano car project does not seem to have yielded similar goodwill with the locals. Maybe it will, over time, as the local workforce grows, but the face-offs between the people on one side and the company and state government, on the other, have not exactly generated fond memories.
What hope do the rest have? I don’t know but there is something in this pre-90s approach to industrial investment and growth that is not working. Either there are locals who don’t believe in your (guess even mine) idea of development or there are other forces, like an increasing concern for environment. The people of Kalinganagar and Singur clearly place their own economic, social and maybe environmental interests ahead of a power or car plant.
Working with the state government was thought to be a way out, particularly in the cumbersome process of land acquisition. But the people seem to treat the government on a par with any private land acquirer. The state governments need to work harder, of that there is no doubt. But businesses have to tweak their approach as well and not take the populace for granted. For the people’s licence raj is as potent a hurdle to industrial development as the industrial licence raj. Or maybe worse.