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Slogans and Declarations can't banish Poverty from Orissa
"The behaviour of members engaged in a kind of vandalism on the Orissa Assembly floor and the teachers ransacking the Bargarh collector’s office are similar to a great extent and equally shocking."
Bibhuti Bhusan Pati : April 19, 2008
Professional planners, social leaders and politicians always bemoan the fact that though Orissa is blessed with abundant mineral resources, poverty continues to dog the state even after 60 years of independence. This issue is also repeated ad nauseam at all workshops, conferences and meets held by World Bank and other international mega developmental financial institutions and trade associations.
I have always been amused by the distinctly repeated attempt to highlight the state’s poverty and somehow link its removal to the untapped plentiful mineral resources of the state. These views are not without a purpose.
The results of this propaganda perpetrated over the last several decades are clearly visible. The general public remains under the patently incorrect illusion that the chronic poverty of the state would somehow vanish if only our mineral resources are dug out and sold to the world. This chimera has been created, fostered and nourished assiduously also by the MNCs hiding behind trade bodies and opportune investors who invariably look for lucrative avenues for employing their capital to fetch them such obscene rates of return.
An aluminum project in one of the poorest district of the state, i.e., Kalahandi has a 1:113 cost benefit ratio. For every rupee invested, the investor shall grow richer by Rs.113. The entire factory is mechanized and there is little scope for local employment. None of the locals who are primitive Dongria Kondh tribals possess a degree in engineering or are MBAs which could have found them a job.
After twenty years, when the bauxite mines run out, the investor flees, leaving the locals to cope with the adverse impacts and horrors of untreated effluents and wastes. With their local environment destroyed, the unskilled natives who used to eke out a subsistence living from the thick forests are forced to become environmental refugees and work as coolies in a hostile far off town.
No doubt, the elaborate chicanery is couched in populist slogans of being partners in development of the state and bringing a smile to every tribal in the area, notwithstanding that their main source of livelihood, the thick forests are being hacked down everyday to make way for such mega industries and mines!
Actually, any serous researcher does not have to look far to examine the history of poverty in Orissa and the results of the development paradigms touted as a panacea. In the northern district of Keonjhar, innumerable iron, manganese and chrome ore mines operate. Yet this district continues to languish in poverty and neglect with a falling per capita income, lack of education and health facilities. A majority of the population are marginal farmers and labourers working in the mines. Even employment in the mines is falling as they take to increased mechanization to feed the roaring demand. Now who has gained so far since the last 60 years of mining in Keonjhar? The mine owners and the petty government officials who are posted there of course!
A few days back, the desperate locals have started an economic blockade to force the repair of roads by an insouciant government though crores are earned by the miners and the state. The road has been damaged by the plying of thousands of mineral laden trucks everyday, as the district was busy in selling its mineral resources, making it impossible for the ordinary man to even take an ailing relative to the nearest hospital.
The mineral wealth of Orissa places it on the top of the mineral map of India since it contains huge deposits of ores required for base metals like pig iron, steel, aluminium, chromium,etc.. Ironically, though the state is supposed to be one of the richest states so far as natural resources are concerned, yet it continues to be the poorest state in India.
The state is a classic example of the “resource curse” principle as enunciated by George Monbiot. The "Resource Curse" is evident in mining throughout Africa, Latin America and Asia: projects that were supposed to bring national prosperity have led to widespread impoverishment, and undermined the fabric of social life.In Sierra Leone, Congo and Angola (to cite some most notorious cases) the mining of these countries' rich mineral deposits has caused immense bloodshed.
The benefits from such exploitation flow out of the state into the hands of MNCs and investors who bring in capital from outside. Any primary school textbook on economics would state that the returns from capital investments would flow to the hands of the owners and definitely not be handed out as charity to the impoverished populace whose resources are being ripped out.
I have no problem with this dictum which is behind every investment decision and deployment of capital in any part of the world. Which industrialist or investor would invest money if he is not sure of returns and if he does not reap the profits? And unless there is economic activity how do you earn surplus? However, I am worried that this approach cannot be applied to our state were you do require investments but definitely not in mining and industries.
The investments have to ensure employment for all first and that is only possible in agriculture and other employment generating activities like food processing, garments, BPOs, etc. And you have to take care of both the vast rural masses without education as well as the growing educated unemployed of the urban centres.
Two Harvard economists Sachs and Warner studied 97 countries over 20 years to find out what drove their economic success and discovered quite unexpectedly that there was negative correlation between abundance of natural resources and economic well being.
They concluded that human ingenuity and innovation is more valuable than physical resources. This theory is borne out by the well-cited success story of Japan an island state with little resources but now viewed as one of the richest countries of the world.
But yet the planners and decision makers who want to liberate Orissa from the clutches of poverty continue to hold out that unless the state exploits its mineral resources it will not develop. They forget and ignore the lessons from the rest of the world and even fail to read the clear writing on the wall in the case of Keonjhar district which should have been one of the richest districts of the country now in view of the rapid expansion of mines.
The state has 97% of the country’s chrome ore reserves and almost 1/3rd of the iron ore . It has nearly half of the bauxite reserves of the country and most of it is high quality making it a favourite destination for aluminum manufactures. Nickel ore is also found in huge quantity of as much as 95 %.
Orissa has become the favourite destination for mining groups from all over the world who are rushing here to snap up mining leases. The state government is dancing to the tune of the DFID and the World Bank which has played a key role in influencing government policy for issue of liberal licenses for minerals. Under the pretext of poverty alleviation it has advised the state to sell of its rich mineral resources at cheap prices to giant corporations. Most of the mining companies of the world are funded by the World Bank owned International Finance Corporation (IFC) which earned 56 % of its divided income from extractive industries like oil, gas and mining.Currently India is the second most important country for its investments.
There are 40 new steel plants planned in the state with a combined capacity of 56 million tones per annum of steel production which shall require about 1,600 million tons of iron ore over the next 25 years. The projection for the required demand of iron ore is about 40 % of the state’s known reserves. Accounting for expansion of capacity, another 20 % of the reserves shall be consumed making a total of 60 % of the known reserves
Posco, the Korean steel maker alone is demanding at least 600 million tons which is 15 % of the state’s reserves. Can we afford to exhaust 60 % of the state’s iron ore reserves within the 25 years? Allowing mining groups to exhaust our resources in a single generation, licenses the state government is guilty of violation of the principle of “inter generation equity” as laid down by the Supreme Court.
The state has earmarked 1,000 million tons of bauxite ore to various companies which is nearly 60 % of its known reserves. These reserves are expected to be used up within 20 years as demand grows. The Orissa government’s Mining Department is also violating its own objectives …….. “conservation of minerals for future generations.”
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Mining Revenue of Orissa Government
However, the state has little to gain from mining revenues since mining royalties continue to be abysmally low. As per the official figures, the state could manage to collect only 670.51 crore as royalty in 2004-05 though mineral production runs to thousands of crores of rupees. Royalty on Iron ore is a measly Rs.26 per tonne when the market price of prime quality ore is almost Rs.2,800 ! Who gains from mining? Not the state obviously.
Gloomy Economic Indicators:
The state portrays an extremely negative image of overt poverty for decades characterized by child sale and starvation deaths hitting the national headlines. All along Orissa economy has been characterized by high level of poverty caused by large scale unemployment and under-employment.
The per capita income of Orissa increased marginally from Rs.6487 in 2003-04 to Rs.6555 in 2004-05 (Advanced Estimate) at constant prices. The advanced estimate of 2004-05, shows that there is marginal fall of compound annual growth rate for Orissa from 4.46% in 2003-04 to 4.31% in 2004-05. The gap between per capita income of Orissa and at the National level also grew from Rs.5128 in 2003- 04 to Rs.5859 in 2004-05.
The Gross State Domestic Product (GSDP) at constant prices (1993- 94) of Orissa has increased from Rs.18, 536.66 crore in 1993-94 to Rs.29, 487.94 crore (Advn. Estimate) in 2004-05 registering an annual compound growth rate of 4.31 percent over the period.
Food grain production decreased from 71.52 lakh MT in 2003-04 to 69.65 lakh MT during 2004-05. Agriculture and allied sectors continue to be the main-stay of the State’s economy with a contribution of about 25.75% to NSDP during 2004-05 at 1993-94 prices.
Arable land remaining almost the same, the per-capita availability of land in Orissa has considerably gone down from 0.39 hectare in the year 1950- 51 to 0.15 hectare in 2004-05 due to increase in population. Because of erratic monsoon, agricultural production fluctuates widely from year to year. The net irrigation potential created in the State by the end of 2004-05 from all sources was 26.96 lakh hectares, which is around 46 % of the estimated irrigable area of the State.
Unemployment in Orissa
Due to increase in population and consequent addition to the labour force, supply of labour continues to outstrip demand resulting in increase in level of unemployment and underemployment. The occupational classification as per 2001 Census shows that the total workers in the State account for 142.76 lakh constituting 38.79% of the total population.
Out of the total number of workers, main workers accounted for 67.2%. The mainworkers comprise of cultivators (35.8%), agricultural labourers (21.9%), household industries workers (4.2%) and other workers (38.1%)..Growing unemployment particularly the phenomenon of educated unemployment is a burning problems of the State.At the end of 2004, the number of educated unemployed in the State was 7.45 lakh, which comes to 86.73% of the total number of applicants of 8.59 lakh.
The number of registrations made in employment exchanges during 2004 was 2,67,337 and vacancies notified was 1760.Ongoing reform process of the State Government to downsize State Government establishments as well as PSUs has severely affected the placement initiatives. During 2004, about 2.67 lakh job-seekers were registered in the employment exchanges as against 1.69 lakh job seekers registered during 2003.
Out of 2.67 lakh registrants, 68,468 were SC and 44,933 were ST which together constitute 42.4% of the total as against 32.9% recorded in 2003 which indicates that unemployment of SC and ST candidates is growing. Notification of vacancies is showing a declining trend which came down to only 1,760 during 2004 as against 2,325 vacancies notified during 2003.
During 2004, 1760 placements were made against the same number of vacancies notified which constitute 0.66% of the registrations made during the year and 0.20% of the total applicants on the live register by the end of 2004. Out of 1760 placements made in 2004, 504 (28.6%) were SC and ST.
Poverty situation continues to be Depressing:
It would be useful to compare the poverty levels of the state and the changes which have occurred over the last few 30 years. The state has been a laggard in rooting out poverty compared to other states which achieved commendable progress. States with little or no mineral resources could successfully fight poverty and improve the lives of their masses.
Poverty has declined in Orissa from 66.18% of the population being under BPL in 1973-74 to 47.15% BPL in 1999-00. However, the pace of poverty reduction has been extremely slow compared to the average for te entire country since the All India index declined from 54.88 % to 26.10 % i.e., a decline of almost 50 % within 27 years whereas Orissa state could achieve only 19 % . States like Punjab could decrease their BPL from 28.15 % to 6.16 % during the same period i.e., a decline of 78 %.
How could Punjab achieve this miracle though it was not a “resource rich” state like Orissa? Through full development of agriculture which provided employment to its population. Successive governments took care of irrigation , marketing and cold storages which ensured that farmers did well and flourished and thereby provided employment to even the landless .
Under Nourishment of Rural Masses:
The table below illustrates the consumption pattern and clearly shows the extreme levels of under nourishment of the average rural Oriya compared to a rich state like Punjab. It also indicates that the average Punjab rural dweller has money left over after meeting his food needs to spend more on non food items which is an indicator of prosperity. On the other hand, rural Oriya farmer spends only Rs. 230 on food while the Punjab farmer spends Rs.402 almost double on food . The rural Oriya consumer has only Rs 166 to spend on non food needs while the Punjab consumer spends Rs.483.
Industries and Employment
Though there has been a growth in the number of factories operating in the state, employment had registered a steady decline. More decline is forecast as industries revamp and modernize existing production processes taking advantage of technology to increase production and achieve higher quality. Industrialists also need to keep changing their processes and product mixes in response to the rapidly changing market needs, changes which can only be successfully carried out by mechanized production lines. Training and re training labour to make new products by new methods would be economically disastrous. Thus it is clear that growth of industrial units will not result in more employment.
For e.g. studies have shown that for every Rs. 1 crore invested in manpower intensive industries like agriculture, NTFP processing, cottage industries, agro process industries, employment generation is to the tune of 200-300 persons. On the other hand an aluminium refinery unit with an investment of Rs.4,500 crores would generate a total employment of less than 300 persons as direct employees.
The Way Out
It is well known that nearly 65 % of the population is directly and indirectly dependent upon agriculture for a livelihood. However, this sector continues to languish for want of inputs and government attention. The only attention is by way of passing the contract farming bill and allowing large Indian corporates to start farm produce marketing. There is no talk of cold storage facilities, marketing linkages, easy credit to farmers, development of irrigation facilities, etc.
The primary goal is to provide employment to both rural and urban masses so that everybody has an income and thereby is at least given an opportunity to escape the trap of poverty. The solution to this problem lies in labour intensive rural development and wage-employment programmes. With 65% work force, directly and indirectly engaged in agriculture sector, Orissa remains an agrarian economy. The state should not forget this. Planners and decision makers should always focus on development of agriculture and realization of the full agro potential of its lands and people. The single thought which should govern investment decision making by every government functionary should be to apply the test of increase in employment, should it be permitted.
However, due to low level of irrigation and lack of inputs , the overall productivity of the sector is low as compared to the agriculturally developed states like Punjab and Haryana. More than half of the area which are irrigable is yet to receive the benefits of irrigation. Instead of borrowing World Bank funds for high speed roads and power reforms to feed the growing needs of industry, the state should borrow money for completing its long pending irrigation projects which would provide water to millions and also set up storage facilities.
It is difficult to visualize how the path of capital intensive industrialization presently touted by the state government as a panacea to chronic unemployment shall lift the people from the chronic poverty levels. It is a totally inappropriate solution and shall fail to address these burning issues. Such a route might increase the GSDP and per capita income of the state but such growth would be inequitable and skewed since it would concentrate income and wealth in the hands of owners of the capital which is now flowing into the state.
9 % growth in the Indian economy does not necessarily lead to increase of per capita income of every citizen. The fruits are reaped by the elite and the middle class of the cities and rural India continues to live in darkness though the rest of India might be shining ! The “aam admi” has little to gain and it is well proved by several contemporary studies that the trickle down effect rarely works in India given its high levels of illiteracy and inequality. That is the reason why there is talk of inclusive growth by the Planning Commission.
And there is no better example of “exclusive growth” than Orissa where shiny metal aluminum production factories co exist as islands of development in remote tribal tracts while hundreds continue to be killed by medieval epidemics like cholera!