Why India could remain forever poor

The Indian Express, Sept 30, 2012

If there is one story that contains in it all the reasons why India remains a poor country, it is the story of the Vedanta aluminum refinery in Odisha. Now that economic reforms are back on the government’s agenda, it is a story I hope high officials, high-minded judges and busybody NGOs listen to carefully. Why do I tell it this week? Because earlier this month, Sterlite Industries gave notice that they are closing their Lanjigarh refinery because it is bleeding to death. It has lost Rs 2,500 crores trying to stay alive these past two years. When it closes, 6,500 people will lose their jobs in one of India’s poorest districts.

On a tour of Kalahandi’s villages, during the 1987 drought, I saw poverty so horrific that memories of children dying slowly in barren mud huts remains etched painfully not just in my mind but in my heart. The rains failed that year so the economy based on a single annual crop collapsed and thousands of Adivasi families were forced to live on a diet of birdseed and mango kernels for months. Women started selling babies they could not longer feed.

You would think then, would you not, that if someone was prepared to bring investment to such a desolate place he would be applauded, welcomed with open arms. The very opposite happened and for the wrong reasons. The first people to start protesting against Vedanta were foreigners. Had the refinery functioned on bauxite from the nearby Niyamgiri hills, aluminum could have been produced in Lanjigarh at $1,500 a tonne, instead of the global cost of $2,050. This caused alarm bells to start ringing in the ears of the international aluminum industry and soon powerful foreign NGOs appeared in Kalahandi to stop the project. Greenpeace and Amnesty International are still there supposedly to protect the interests, and sacred hills, of forest-dwelling Adivasi tribes.

The ‘foreign hand’ would not have mattered if the Government of India had not intervened to make the functioning of the refinery impossible in different ways. One of which was to declare that bauxite could not be mined in the Niyamgiri hills. There continues to be confusion about whether this was for environmental reasons or whether it was to protect Adivasis from losing their land. But, once mining was banned, the Orissa Mining Corporation that had signed an agreement with Vedanta to supply it with 150 million tonnes of bauxite, could no longer do so. It has so far been unable to supply an ounce. Vedanta’s environmental, governmental and NGO problems began after an investment of more than Rs 15,000 crores had already been made in the refinery so for two years it functioned on bauxite imported from other states. An unviable situation so the project will now close.

The Adivasis can now go back to living in primitive harmony with nature without schools for their children, without healthcare, without electricity or clean water and without the possibility of ever improving their lives. Will they be happy this way? Only according to urban NGOs who build flourishing businesses on romanticising desperate poverty and a way of life that they themselves could not abide for a single day.

What is interesting about the targeting of Vedanta by such a range of vested interests is that if it were a public sector company, it could have gone ahead and raped the Niyamgiri hills without anyone noticing. It has happened often in the past and continues to happen across the country. So when the Prime Minister sets in motion his new phase of economic reform, he should ask himself why. Could it be because those who would like to see India’s private sector remain the stunted creature it once was would like it to go back to being that way?

Judging from the tirades of NGOs and leftist political parties, this seems to be the case. They want all the country’s natural resources to remain in the hands of the state even if governments lack the money and the technology to exploit them. They appear never to have asked themselves why it is states that are richest in natural resources whose people remain mired in horrible poverty. Sadly they have been able to get away with the rubbish they talk in the name of the poor because the Prime Minister has never explained the need for economic reforms.

If all he can come up with is the kind of speech he made last week about ‘money not growing on trees’, then there is not the smallest chance that the reforms will succeed. The noise made by those who are either economically illiterate or have a vested interest in India remaining a poor country forever is too loud and the mood of negativity they have created too deep. The lies they have told are widely believed.