EAST INDIAN STATES SEE PROTESTS AGAINST RETAIL AND MINING

UNCLAS SECTION 01 OF 02 KOLKATA 000164 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EIND EINV EAGR EMIN ASEC IN KS SUBJECT: EAST INDIAN STATES SEE PROTESTS AGAINST RETAIL AND MINING INVESTMENTS REF: A) KOLKATA 0145 B) KOLKATA 0140 C) KOLKATA 0104 D) KOLKATA 0088 E) KOLKATA 0092 F) KOLKATA 0041 ¶1. (U) SUMMARY: On May 12, two states in East India experienced several protests against investments by large corporations. In Jharkhand's state capital Ranchi, small scale food vendors attacked newly-opened Reliance Fresh supermarkets fearing that that the lower cost retail markets would destroy their livelihoods. On the same day, villagers in the neighboring state of Orissa detained three Indian officials of the Korean Pohang Iron and Steel Corporation (POSCO) who were trying to persuade farmers to sell their land for a planned multi-billion dollar steel plant (Ref. B). While separate issues in different states, the recent agitations against large commercial projects reflects a continuing tension in the region over investment and economic development versus the perceived interests of India's poor and the informal business sectors. END SUMMARY. -------------- Anti-Retail Rage in Ranchi -------------- ¶2. (SBU) On May 12, Matia Mazdoor Sangh (a union of vegetable vendors in Ranchi) leader Uday Shankar Ojha, followed by at least 2,000 vegetable vendors and middle-men, (between the farmers and the wholesale market) attacked three recently-opened Reliance Fresh supermarkets owned by Reliance Industries Ltd. Store windows were broken, equipment destroyed and goods and produce smashed to protest against the entry of the new supermarkets in Jharkhand. Over a dozen people were injured during the violence but the local police simply stood by and watched rioters tear the stores apart. The police only attempted to control and disperse the crowd after four hours, when they were about to raid a fourth outlet. The police finally arrested just six people, including Uday Shankar Ojha. ¶3. (SBU) Since February, Reliance Fresh has set-up four retail shops in Ranchi and is in process of establishing a fifth one. It also has plans to open soon five retail shops in the steel city of Jamshedpur and four in coal city of Dhanbad. Ojha believes that at least 10-15 thousand vendors in Jharkhand's larger towns of Ranchi, Jamshedpur, Dhanbad and Bokaro will soon be jobless as Reliance Fresh is purchasing the vegetables directly from the farmers and in turn is selling the produce at much lower prices than the small vendors. In the past, Ojha had unsuccessful stints as a politician with populist parties like Samajwadi Party of Mulayam Singh Yadav and Lok Janshakati Party of Ram Bilas Paswan. Observers in Ranchi commented that Ojha is now supposed to be close to Jharkhand's ex-chief minister Babulal Marandi's Jharkhand Vikas Morcha. ¶4. (SBU) Senior Vice President and Mentor of Reliance Fresh Prabhat Sinha (please protect) in Ranchi told Post that these incidents are initial teething problems and can be sorted out. He added that "The farmers are happy as their market is assured and they are getting a much better price for their product." Also, well placed sources in Ranchi told Post that "The incident took an ugly turn as Reliance failed to pay a bribe of Rupees 10,000 (USD 250) each to the nearby three police stations [for protection]. Since they were not paid, the police never responded to the situation when the violence erupted. They stood there like mute spectators." Police contacts rationalized their inaction to Post by claiming Reliance Fresh had not lodged a complaint nor informed the police of the protests and added that they responded as soon as they received a complaint. ¶5. (SBU) The Ranchi incident showed that the entry of large corporations into India's fragmented USD 200 billion retail business is not likely to be smooth. Organized retail in India is just about 5 percent of the overall retail sector and KOLKATA 00000164 002 OF 002 Reliance plans to invest USD 5.6 billion, hoping to dominate the industry before foreign players can enter. Reliance is not put off by the demonstrations and a senior Reliance official told Post that the company has to "negotiate" with the protesters. -------------- Korean Steel Standoff in Orissa -------------- ¶6. (U) Also on May 12, while vegetable sellers in Ranchi were agitating against the activities of an Indian corporation, in neighboring Orissa angry protestors in Govindpur village (Jagatsinghpur district) detained three Indian officials of the Korean steel giant POSCO. POSCO is planning to invest USD 12 billion to develop a 600 million-ton iron ore mine and 12 million-ton-a-year steel plant. POSCO acquired 14.85 million square meters of a 16.50 million square meter site. However, it is unable to acquire the remaining 1.65 million square meters because of the opposition of nearly 4,000 families in three villages that are facing displacement to make way for the steel factory. ¶7. (U) When POSCO's officials visited the project site to convince local people about the benefits of the new development, agitated villagers surrounded the three officials and refused to let them leave. One woman in the group was released after three hours and the rest were freed after 10 hours, with the promise that they would not return. According to POSCO, the plant would benefit locals in providing employment to 20,000 people and indirectly provide jobs to another 870,000. ¶8. (SBU) COMMENT: These two incidents are indicative of the difficulties new commercial initiatives - Indian or foreign - face in developing India's markets and industry. In both cases, the corporations had mandatory clearances and support from local governments but they did not gain the confidence of local stakeholders. (In the case of Reliance, one overlooked stakeholder was apparently the local police.) This was also true recently in neighboring West Bengal, where the state government had to back out of a lucrative SEZ project in the rural Nandigram district when it faced local resistance. The success of various groups in blocking commercial plans has served to embolden others to question projects as well: i.e. protests in West Bengal against a TATA car factory in Singur appears to have contributed to tensions in Nandigram, which has inspired villager agitation in Orissa against POSCO and more such clashes will likely flare-up elsewhere. The lesson for companies hoping to implement large-scale projects to take from this backlash is that they will have to engage early and extensively with the affected communities and cannot rely on often incompetent and corrupt local governments to mediate disputes or land acquisition for them. The companies themselves have to sell the message as to the benefits of their investments to an often skeptical public. JARDINE