Claims about the benefits of Posco's $12 billion integrated steel project to Orissa's economy and job market come from an “independent” research organisation — which happens to be sponsored by Posco itself.
In January 2007, the National Council of Applied Economic Research (NCAER) published a report on “Social Cost Benefit Analysis of the POSCO Steel Project in Orissa,” which claimed that the project would directly and indirectly generate 8.7 lakh jobs, and would contribute 11.5 per cent to Orissa's economy by 2017.
These claims have been widely cited by both Posco and the Orissa government. As recently as June 2010, following the expiry date of its original MoU with Posco, the State government cited the study to justify the importance of the project to Orissa's economy, despite widespread protests.
Conflict of interest
However, it has not been publicised that Posco is a sponsor of NCAER. While the Korean steel giant is mentioned on the list of sponsors and partners on the NCAER website, there is no disclosure of this conflict of interest in the published study.
Instead, in the preface to the report, NCAER Director-General Suman Bery merely states that the organisation was “approached” to carry out a cost benefit analysis of the project, and adds that: “It is NCAER's hope, the policy planners would find the report relevant and useful.”
“We do have processes in place for vetting the professional quality of our work. Our normal procedure is to indicate who the sponsor was in the foreward,” Mr. Bery told The Hindu on Wednesday, admitting that Posco had paid for the study.
“We do keep our ethics policy under review. If we were to release the report today, I think there would be a somewhat tighter formulation.”
Posco-India brochures, using the study to flaunt the economic impact of the project, also fail to mention the company's partnership with the research organisation.
A group of NRI researchers, working under the banner of the Mining Zone Peoples' Solidarity Group, has now ripped apart the economic integrity of the NCAER report, claiming that it used flawed data to exaggerate benefits and minimise costs.
“Both the tax revenue calculations and the EIRR estimates of NCAER are deeply flawed,” said Shalini Gera, one of the researchers who produced the report titled ‘Iron and Steal: The Posco-India story'. “For instance, the positive appraisal of the project's Economic Internal Rate of Return (EIRR) is based on the use of maximal figures on revenue and minimum figures on costs, including the complete exclusion of the costs of roads, railway, port and township. However, this should not surprise us as NCAER has taken money from POSCO and is badly compromised,” she added.
According to the researchers, in contravention of Asian Development Bank guidelines, the NCAER calculation does not account for the current baseline economy, making its conclusions invalid.
The thriving local economy has not been taken into account in compensation calculations, they said. While a betel vine farmer, who would be displaced by the project in the coastal Jagatsinghpur region, currently makes over Rs. 40,000 for 1/100th of an acre each year, the government and Posco are offering a paltry one-time compensation of just Rs. 11,500 for the same amount of land.
The NCAER's employment generation figure of 8.7 lakh man-years of employment for 30 years is not even supported on Posco's own website. The company only promises 4.67 lakh-man years of employment during the construction phase alone, while overall employment generation is only estimated at 48,000 jobs.
While the project has been promoted as India's single largest FDI investment, “its financial benefits are grossly exaggerated,” say the researchers. “If carried forward in its current form, it will certainly result in the repetition of a process that is now known internationally as ‘growth without human development.' Overall, the country stands to lose rather than gain from the POSCO project.”