Odisha has jeopardized agriculture to favour industry: CAG draft report

State went on MoU signing spree without considering food security and livelihood of people

By T N Vijayalakshmi
Published: Thursday 24 January 2013

Projects such as the POSCO steel plant in Jagatsinghpur district and Vedanta's bauxite mining proposal in Niyamgiri hills in Kalahandi have been stiffly opposed by local people, including affected tribals and forest dwellers (Photo by Sayantan Bera)

The Odisha government has committed the state's natural resources like land and water to industries without bearing in mind agricultural needs, says a draft report of the Comptroller and Auditor General of India (CAG).

CAG has sought views of the state government before finalising its performance audit report—Commitment made in memorandums of understanding (MoUs) for setting up of industries in the state and acquisition/allotment of land thereof—that has slammed the Naveen Patnaik government.

Land, water and minerals being finite and scarce resources, its need-based allotment to different promoters of industries is required to be made keeping in mind the requirement in future, says the report. “The natural resources are not factors of production (only) for industrial growth but also for agriculture production on which the food security of the country rests, and these also had impact on sustainability of environment and sustenance of livelihood of citizen,” the draft copy, which is in possession of Down To Earth, says.

No assessment of availability of natural resources

Auditors have gone through scores of MoUs, minutes of government records, recorded views of departments and existing policies before observing that the state government has not made attempts to assess availability of natural resources prior to allowing industrial projects.

As many as 93 MoUs were signed by the state government with private promoters between 2001 and 2012 for setting up industries.
By March 2012, 35,793.498 acres of land (one acre equals 0.4 ha), which includes 25,012.345 acres of acquired private land and 10,781.153 of government land, was allotted to 54 companies under MoUs, 34 of which relate to the steel sector.

“But no policy or guidelines for assessing the need as well as other inputs like land, water and minerals, attracting entrepreneurs to the state through open competitive bidding, signing of MoUs with promoter companies for setting up industries in the state was formulated,” the draft performance report says.

CAG has invoked clause 9.11 of Industry Policy Resolution 2007, saying “all efforts should be made to avoid (allocation of) double cropped agricultural land and minimize R&R requirement.”

It was noticed that in 49 MoUs, commitment for providing 59,333.601 acres of land was made without any exercise to scrutinise the land category (whether agriculture, irrigated or double cropped)and no consultations were held with other departments like Revenue and Disaster Management, Water Resource, Agriculture department and district collectors. “This is indicative of the fact that the department has signed MoUs with promoter of industries and made commitments without assessing the actual availability of land, water and minerals,” the report says.

On minerals, the report says “it was noticed from minutes of 12 High Level Clearance Authority meeting held on January 27, 2010 that as against availability of 1,805.81 tonnes of total bauxite in the state, the department in different MoUs had already committed for supplying 74.61 tonnes of bauxite per annum for which the entire bauxite reserve of the state would be exhausted in next 24 years.”

Industry calls the shots

CAG has observed that industry decides where and how much land it needs.

“Checks of MoUs and concerned files revealed that promoters themselves have selected the sites and applied for acquisition subject to their suitability. The Industrial Investment Promotion Corporation of Odisha Limited (IPICOL) has assessed the requirement and based on appraisal by it, Odisha Industrial Infrastructure Development Corporation (IDCO) has filed requisition with concerned collector for acquisition of land identified by the company,” the draft report says.

It goes on to say that no exercise was conducted by government to ascertain the availability of government land to ensure barest minimum acquisition of agriculture land.

Besides, the government has not selected sites suitable for establishment of steel and power projects, mining projects, other industries considering the availability of water, mineral, government and non-agricultural land, and approachability.
“As a result, sites for setting up of industries were identified by promoter companies and got regularized by applying through IPICOL and IDCO.”
Allotted land mortgaged

The CAG report also points out other irregularities. In one instance, administrative approval for acquisition of 1,745 acres of private land was given with the approval of minister for steel and mines prior to signing of MoUs with the promoters. “It is highly irregular and is indicative of extension of undue favour to private promoters,” the auditors observed.
What’s more, it has been found that permission has been given by IDCO to promoters for mortgage of allotted land and in eight out of 19 test-checked cases.

“The promoters concerned have mortgaged the allotted land in different banks to avail loans though no such commitment was made in MoUs. Revenue department has not even authorized IDCO to give such permission for creation of mortgage by the promoters,” the draft report says.

Ironically, IDCO does not have the information about the quantum of loan availed by promoters by mortgaging land resources. “Accordance of mortgage was highly irregular and the department has practically no monitoring on the issue,” the auditors said.

No estimation of benefits from industrialisation

No record could be provided to audit by IPICOL and IDCO and steel and mines department to show that due diligence has been exercised to examine the proposal of promoters and benefits that would accrue to the state and that would be extended to the particular project proponent before signing of MoU.

“We also found that neither any competitive bidding was made for selection of parties for setting up of any particular type of industry or infrastructure projects nor even any Request for Proposal (RFP) was issued. We noticed that states like West Bengal, Gujarat and Karnataka are inviting RFP for setting up of industries in the State,” said G Chandraprakash, deputy accountant general, in a letter addressed to state steel and mines secretary.

Chandraprakash wrote to the state, seeking its views for incorporation in the final performance audit report.


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