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.



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Anti-Retail Rage in Ranchi

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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.



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Korean Steel Standoff in Orissa

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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