No. 51, August 2011

No. 51
(August 2011):

To Our Readers

A Modest Proposal regarding Subsidies

The Dangers of Providing Speculators a Bigger Playground

Foreign Investment and Land Acquisition: from Posco to Poena

Foreign Investment and Land Acquisition: from Posco to Poena

In recent years, innumerable struggles have sprung up across the country resisting attempts to forcibly acquire land. The most prominent of them – such as the Kalinganagar, Posco, Kashipur, Niyamgiri, Nandigram, Singur, Jaitapur and Yamuna Expressway struggles – have become familiar names. As they resist the forcible acquisition of their land, villagers directly confront the police, officialdom, and sometimes hired goons. In each case, behind these repressive forces stands the Corporation for whom the land is being grabbed – Tata Steel, Posco, Hindalco, Vedanta, the Salim Group, Tata Motors, Nuclear Power Corporation of India (NPCIL), Jaypee Infratech, and the like. And, in the current era of globalisation and financialisation (or financial globalisation), the Corporation increasingly represents not only its ‘promoters’ (say, the Tatas, Birlas, Ambanis, etc), but foreign financial interests as well. These interests are less visible, and are rarely commented upon; but they are no less important for that.

These financial interests appear in various forms. In an earlier issue of Aspects¹ we had given the example of the Korean firm Posco, which is acquiring land in Orissa in the face of stiff resistance from the peasants there: The largest shareholder in Posco is the Bank of New York; besides this, other US investors also hold substantial stakes. To take some other instances:

• The nuclear plant at Jaitapur is being set up by the public sector corporation NPCIL, but the reactors are to be supplied by the French firm Areva and the finance is to be supplied by France.
  
  
• The firm trying to grab Niyamgiri from the Dongria Kondh tribals in Orissa is Vedanta Resources. Vedanta’s origins are in India, but it is now headquartered in London and listed on the London Stock Exchange. The controlling interest is held by Volcan Investments, a Bahamas-based investment firm controlled by Anil Agarwal and members of his family; the remainder is held by a range of international investors.
  
  
• Utkal Alumina, the firm behind the forcible dispossession and repression of tribals in Kashipur, is a 55:45 joint venture between the Aditya Birla group-controlled Hindalco and the Canadian firm Alcan. Further, while Birla-controlled firms and trusts own only 32 per cent of the shares of Hindalco, foreign institutional investors own 31 per cent (including 9.3 per cent held by Morgan Guaranty Trust of New York), and another 8.3 per cent are held abroad in the form of Global Depositary Receipts (GDRs)² In other words, foreign holding in Hindalco is larger than the Birla holding.
  
  
• Tata firms and trusts hold 34 per cent of the shares of Tata Motors; FIIs own another 23 per cent, and shares issued abroad (American Depositary Shares and Global Depositary Shares, listed on the New York and Luxembourg Stock Exchanges, respectively) account for another 19 per cent. Thus the foreign shareholding of Tata Motors is over 42 per cent, i.e., more than the promoters’ shareholding. Tata Motors also has substantial foreign loans.
  
  
• Of Tata Steel FIIs own 17 per cent, and another 2.5 per cent is held as GDRs. But more importantly, Tata Steel is servicing a massive foreign debt, a large part of it taken on for the purchase of the Anglo-Dutch steel firm Corus. Net debt at end-March 2011 was Rs 46,632 crore (Rs 466 billion, or $10.5 billion), much of which consists of foreign currency loans. Note that it is the profitable Indian operations of Tata Steel have paid for the servicing and gradual reduction of the loans.
  
  
• From a search of the internet, we were unable to find anything about Bright Equity Group Limited, the channel through which the Salim Group are investing in West Bengal. However, it is worth noting that the Salim Group’s holding company, through which they control their various investments across Asia in telecommunications, infrastructure, food products, and natural resources, is the Hong Kong-based First Pacific Company Ltd. Only 11.3 per cent of First Pacific’s shares are held in Asia, compared to 32 per cent held in North America and Europe.³

Such examples can be multiplied. For example, since the privatisation of Mumbai airport, the Andhra-based infrastructure firm GVK Power and Infrastructure Ltd (GVKPIL) is the operator of the Mumbai International Airport Ltd (MIAL), in which it now has a majority stake. FIIs own a 27 per cent stake in GVKPIL. GVK in turn has given the job of ‘rehabilitating’ (read: evicting) the over 4,00,000 people (who have lived for 40 years in slums on the land around the airport) to the real estate firm Housing Development and Infrastructure Ltd (HDIL). This is reportedly the single largest eviction-and-rehabilitation project in India. (Incidentally, none of the 276 acres of slum land being cleared is required for expansion of the airport; as revealed by GVK’s own published plans, it is required only for the development of shopping malls, hotels, and other commercial real estate.) HDIL is controlled by Ramesh Wadhawan, who is on the Forbes billionaires list for 2010, and thus among the richest 50 persons in India. However, the holdings of Wadhawan, his family, and various firms he controls amount to only 38.6 per cent of HDIL’s shares, whereas FIIs’ holdings amount to 42.5 per cent.⁴ HDIL has been raising money for the project by selling fresh shares to foreign institutions (through what are called ‘qualified institutional placements’). Investors are attracted by the large revenues HDIL anticipates from the project.⁵

Little attention has hitherto been given to perhaps the biggest infrastructure project – or rather, biggest land grab – in India’s history: the proposal to construct an ‘industrial corridor’ between Delhi and Mumbai. The Delhi-Mumbai Industrial Corridor Development Corporation (DMICDC) plans to develop 24 ‘industrial cities’ over 5,000-5,500 sq km in the 1,483 km-long corridor between the country’s financial capital and political capital -- spanning the National Capital Region, U.P., Haryana, Rajasthan, Gujarat, and Maharashtra. In the first phase, by 2018, it plans to develop 7 such cities over about 2,000 sq km at a cost of $90 billion, largely on a “Public-Private Partnership” basis. (See Aspects no. 49, pp. 69-75, regarding how PPPs are channels for giant subsidies to the corporate sector.) The proposal includes three ports, six airports, a high-speed freight line, and a six-lane ‘intersection-free’ expressway. A vast amount of land will be required: 2,000 sq km is half a million acres, about three times the size of Delhi. In July 2011, the finance minister agreed to provide Rs 2,500 crore (Rs 25 billion) per city, or Rs 17,500 crore (Rs 175 billion) in all, towards the project, paving the way for Cabinet approval. Funds for the project will come, apart from the Indian government, from Japanese investments in Indian firms (through depositary receipts) and direct investments by Japanese firms, as well as loans from the Japan International Cooperation Agency (JICA). According to the JICA, “Almost 80 per cent of the funds will come from Japanese loan and assistance.”⁶ Not surprisingly, Japanese firms are to get the contracts. The dedicated high-speed rail line between the two cities is to be constructed with Japanese technology, with Japanese loans to the Railways. Several Indian and Japanese firms are set to sign joint venture pacts, and an official says: “Mitsubishi, Hitachi, Toshiba and JVC have already been roped in for the project.”⁷

As we write this comes the news of the death of a peasant in a police lathi-charge in Punjab. The peasant was part of a demonstration protesting the forcible acquisition of land for the setting up of a 1,350 MW thermal plant in Mansa district of the state. The private firm setting up the project, Poena Power, is a 100 per cent subsidiary of Indiabulls Power. Despite multiple irregularities in, and uncertainties regarding, the project,⁸ the state government appears determined to complete the land acquisition by force. Foreign investors own 32.8 per cent of Indiabulls Power; another 58.8 per cent is held by Indiabulls Real Estate Ltd (IBREL). Foreign investors hold 51.6 per cent of IBREL. Thus the effective foreign shareholding in Indiabulls Power is 63 per cent.⁹

These are merely a few instances; they could be multiplied many times over. Global financial capital has penetrated the Indian economy in various forms, fueling the giant private corporate sector grab of land and natural resources. We need to be alert to, and study, this phenomenon.

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