RED CORRIDOR: A MANTRA FOR INVESTORS

The north-south stretch from Bihar to Andhra Pradesh passing through Jharkhand, West Bengal, Odisha, Chhattisgarh, eastern Maharashtra and Telangana is the mineral rich corridor of India and hence is an attractive destination for the Indian and foreign mining companies. Despite having this capability to attract huge investments, these parts of India continue to remain underdeveloped with significant population below poverty line. On the other hand, the investments have often faced delays resulting in exponential increase to the project cost or project getting stalled. Tata Steel plant in Kalinganagar (Odisha)^[1],     South Korean POSCO Steel in Odisha^[2], Tata Steel in Jagdalpur (Chhattisgarh)^[3], South African Sasol in Odisha^[4] are a few major investments which faced the problems in this mineral rich central – eastern Indian corridor. 

Majority of the investments, including the ones mentioned above, have witnessed the problems during land acquisition which is often opposed by indigenous movements which claim to fight for the rights of the local population. This opposition acquires significant strength due to the support they receive from Naxalites or Maoist also termed as Left-Wing Extremist (LWE). Unfortunately, this mineral rich central – eastern Indian corridor has significant LWE presence and has been often termed by subsequent Indian governments as most serious internal security challenge faced by India. This problem has become more serious as it has spread its reach to several Indian industrial corridors including the one across Haryana – Gujarat – North Maharashtra.  The threats posed by LWE along with indigenous movements to investments include extortions, protests, blockades, attacks among others. On occasions, the local political dynamics and competition provide patronage to LWE and indigenous movements. As these risks are here to stay, the investors must take serious efforts to mitigate these risks or reduce them. 

The proposed investments in the red corridor should precede with a robust R & R and land acquisition strategy followed by deep diving exercises encompassing threat and risk assessments, political risk assessment, stakeholder mapping, competitor analysis, vendor due diligence being the key ones. The investments are advised to retain skilled consultant who has a strong understanding of the socio-political-economic issues in the area where the investment is proposed and has a good ear to the ground to provide security once the investment has been shaped to physical reality. Given the sensitivities in the red corridor, one wrong recommendation may result in heavy losses for the investment. As such, for an investment which is in the range of billions of dollars, investors should not look at the risk mitigating options as a tick box exercise but a serious effort.

The views expressed in this blog are solely based on author’s experiences gained during the investigative assignments undertaken as a consultant. 

^[1] https://www.business-standard.com/article/companies/tata-steel-kalinganagar-plant-commissioning-to-be-delayed-115041000923_1.html;

^[2] https://www.livemint.com;  

^[3] https://timesofindia.indiatimes.com/business/india-business/tata-steel-withdraws-from-bastar-steel-plant-project/articleshow/53889325.cms;  

^[4] https://www.dnaindia.com/business/report-tata-sasol-may-dump-coal-to-liquid-venture-1849512;