July 29, 2010

The Dead Corridor

Can the maritime related industries in India’s eastern ‘Red Corridor’ thrive under the barrel of the gun? What happens to major port expansion plans when the underlying economy is in chaos? Will we see in the near future- like in tin pot dictatorships in Africa and banana republics in Latin America- ships loading and discharging in Orissa while heavily armed paramilitary forces guard gangways, ports, pipelines and conveyor belts?

I think that the possibility of major disruption in Indian maritime trade because of Maoist or Naxal events is a clear and present danger to the entire logistics sector on the east coast. In fact, it is so clear and present that some of it is already happening.

The reality today is that even as a gaggle of ports are being planned- and constructed- down the eastern Indian coastline, from the silted Hooghly in West Bengal down to Orissa and Andhra Pradesh, goods trains are being regularly derailed in parts of the Corridor. Or they are just not plying. Don’t believe me; believe Tata Steel Managing Director H.M. Nerurkar. "For nearly 50 days, train services between Kolkata and Jamshedpur have remained irregular, with night services totally suspended due to the Maoist problem... How long can this continue?" he asked recently. Nerurkar also says that Maoist activity is “impacting the business”. Guns have a tendency to do that.

A few days ago, State-owned National Mineral Development Corporation’s Finance Director said, in typically understated babutalk, that its Chhattisgarh unit could see ‘some production loss’ after a Naxal attack on its complex. This was a day after 50 armed Naxals attacked a NMDC setup that held large quantities of explosives, getting into a running gun battle with the CISF guarding the facility.

The Maoists are today routinely attacking mining outfits to disrupt operations and for the RDX and other explosives that those firms store for use. This includes organisations such as NALCO; the RDX is sold throughout South Asia (including, my not so wild guess, to terrorist outfits) in a trade that is worth millions.

Nine tonnes was stolen in one such Maoist raid earlier this month.

The Maoists also extort (300 crore annually in Jharkhand alone), threaten and collect taxes. The Indian State’s writ does not run in these areas. Worse, it is unable to find a solution – the armed one is not working. Ask the CRPF in Dantewada, where a second Maoist attack killing three dozen of their personnel passed off almost unnoticed (the Home Minister didn’t threaten to resign this time, like he did after a first attack that killed almost eighty. Wonder why).

Interestingly, “Maoists are engaged in illegal mining with the tacit support of the political dispensations in some areas,'' according to R S N Singh of the India Defence Review publication. Singh says that minerals like iron ore, illegally mined by the Maoists, are being transported to China via Haldia, allegedly after threatening bonafide mining companies who generate the required documentation. Ore laundering, one could call this. One can be sure another flock of babus and politicians are making a killing out of this, as did the erstwhile Jharkhand Chief Minister Koda (I wonder why there is no news of him and his 4000 crores. Sometimes I wonder too much).

Yet another worrying reality is that analysts are increasingly pointing at China as the devil behind the Maoists. ``For China, the Maoists are the most reliable tool in the proxy war that it is waging against India,'' Singh says. Others analysts agree off the record, saying that much of the illegally mined ore from India is sent to commodity hungry China.

Things have reached such a stage that the Maharashtra state home minister R R Patil recently demanded that the Directorate of Revenue Intelligence investigate links between Naxalites and the mining lobby. (Reports suggest than 700,000 tonnes of coal are mined illegally from Jharkhand alone every year, and the recent mining scandal in Karnataka has thrown up figures -circa 2007/08- of 5 million tonnes of iron ore that were illegally exported from Karnataka.

Since 2003, 3.04 crore tonnes of iron ore have been illegally shipped out of Karnataka alone. At today’s prices, the value of this ore is Rs 152 billion. .

So, as I understand it, (probably) Chinese backed armed Maoists are holding a massive chunk of Indian territory to ransom. They steal enough explosives regularly to manufacture a zillion landmines and IEDs. Additionally, they sell explosives to any wannabe terrorist in the neighbourhood. Meanwhile, goods trains are derailed or do not run in a part of the Corridor- and neither does road traffic run unhindered, by the way. The government cannot administer even a public toilet in some of these areas. And this is a region where a large chunk of Indian mineral deposits lie (which are 10% of the world's bauxite, 276 billion tonnes of coal and 23 billion tons of iron ore), much to the salivating delight of corporate looters and their political and bureaucratic henchmen.

Expecting shipping not to be hit in these circumstances is like expecting Charlize Theron to go out for a second date with me.

Meanwhile, this fracas is a milch cow for everybody. The politicians and the babus, the multinationals and domestic companies (all immoral, only some illegal, because they control our legislators) the Naxalites and their henchmen, the illegal mining industry and their shady logistics arms.... this conflict is making all of them rich or powerful, usually both.

Also meanwhile, quoting from Mineweb, the South African mining publication, “As a consequence of Naxal activism, several major projects have come to a virtual standstill. ArcelorMittal's $9 billion steel projects in Jharkhand and Orissa and South Korean company POSCO's $32 billion steel project at Jagatsinghpur district in Orissa are stalled due to Maoist violence. A similar situation was witnessed in Jindal Steel Works' $7 billion steel plant at Salboni in West Bengal”.

I believe that the shipping, ports and logistics industries cannot escape the commercial consequences of these killing fields. They will be hard hit down the line because they are, in a way, downstream industries and because a) I don’t expect this conflict to go away anytime soon – in fact, I expect the army to get in there sometime, which will make things messier b) I expect severe financial and other pressure on some eastern ports; some of these terminals were planned with ore exports in mind c) I expect the government will have to start cracking down on illegal mining, which will make the situation more explosive ( though I am a little sceptical that politicians or babus will have the guts to go up against their own). d) I expect the Maoists, especially if they are backed by China, to escalate violence if they can.

None of this will help the maritime industries. I don’t know how they will react- the list of firms involved in building infrastructure and ports down the eastern coast reads like a who’s who of corporate India- but I know this much; making money is not going to be easy in parts of the east. Some will be already looking at exit strategies, I bet, or at least slowing down their investments.

Even if the Maoists are somehow defeated, the underlying causes that give them widespread local support will not go away. The Indian State can hardly shoot the Adivasis and other locals to extinction; it will have to, sometime, assuage their rage.

The only good news that can I see, cynical as this may sound, is that I expect that things will finally get better, if only from a law and order point of view. There is, simply, too much money involved for the State to ignore the circumstances of near civil war that exists in the Corridor, whether one calls it Red or Dead.