Dodgy Development IV: ‘A DFID colony’

In the last ten years, the British government has given £200 million in aid to the north-eastern state of Orissa. This aid has been conditional on the government of Orissa agreeing to undertake, with the Department for International Development (DFID) and the World Bank, “a program to reform the business and direction of government.”* In this fourth part of the Dodgy Development: DFID in India series, through a film and two transcribed interviews, we see the wider effects of British aid and hear from people who are refusing to leave their lands to the South Korean steel company, POSCO, one of the many multinational mining companies that have come to the state following the DFID-initiated reforms.

* From the Aide Memoire of the World Bank and the DFID’s Technical Economic Mission to Orissa, May 8th-13th 2000




Sudhir Pattnaik is the editor of the Oriya magazine Samadrushi, a political fortnightly which has reported and examined Orissa’s reform programme supported by British aid. Here he talks about the DFID’s influence in the state, its role in the opening up of the state to multinational mining companies and the resistance these reforms have provoked.

Richard Whittell: The DFID says all its policies are developed in tandem with the Government of Orissa, and that they, with the World Bank, work in partnership together. Their country plan for India described its support as “providing funding directly to state budgets in support of broad programmes of core budgetary, governance and sectoral reforms within a sustainable fiscal framework.” They have funded Government of Orissa projects and programmes in health, education, public sector reform, livelihoods and many other sectors. How influential is the DFID in Orissa?


Sudhir Pattnaik: We call it a DFID colony. The common saying is that the DFID is into everything that concerns the governance of the state of Orissa. In every sector you will find the presence of the DFID. “this comes from the DFID” is the standard response you get from bureaucrats. I even knew someone very high up in the Vigilance Department, at the rank of Inspector General. He was sharing with us, that at the beginning of every week he gets a memo saying the DFID wants this or that.

This is not acceptable to anybody who has a sense of democracy. We do not accept a foreign government department coming here and dictating and influencing government departments to do this and to do that.

Do you have any examples of this?

Their support for the whole industrialisation process, for example. The DFID and the United Nations Industrial Development Organisation (UNIDO) together conducted many consultative workshops and prepared a blueprint for the industrialisation of Orissa. They wrote and funded the 2001 Government’s Industrial Policy Resolution and, with the United Nations Development Programme (UNDP), they wrote the Government’s 2006 Resettlement and Rehabilitation Policy.

What have been the consequences of this?

The mineral sector has grown enormously. Vedanta, POSCO, Tata, the Jindals; all such companies have come and people are not accepting them or their promises to rehabilitate and resettle people who have to leave their lands for them.

For example, the government is trying to use this Rehabilitation and Resettlement Policy [in] the POSCO proposed area, and in the Vedanta one also. They are using it throughout the state. They say it’s a very progressive policy. They say they are doing it with good intentions, to help people rehabilitate after displacement. But people want more. Land [given in return] for land is not [part of] the policy and the government doesn’t have any will to accept a radical rehabilitation policy. This policy doesn’t guarantee land for land but focuses on compensation. For people who are not used to money wages, if you give them Rs500,000 it has no meaning compared to their land.

Suppose I own land worth Rs500,000. I get that from you when you displace me. That ensures I get exactly the market price for my land. Then I go somewhere else and buy another patch and settle down. But when I go to that place, people know I have that money, so immediately the value of the land doubles. I cannot even buy half of the size of the land I used to own.

But don’t people choose to sell their lands voluntarily?

How can it be voluntary? It’s never voluntary. Either you are forcing, alluring or misleading people. It does not take into account the socio-economic profile of the area. For example, let’s say I’m a landlord. I own five acres of land in an area but I live elsewhere. I decide to dispose of my land because I get a great opportunity when the Tata steel company comes. I wouldn’t get such a good price otherwise. So I decide to sell off my land. But in my five acres of land, five different families live. They’ve been cultivating there. If I dispose of my land how will they survive?

Are there any stipulations for people who don’t own land?

There are some but they’re not enough and are not addressing the main issue. The biggest landowner in Orissa is the state. More than 75% of the land in south west Orissa, for example, is government owned.

But the real owners are the tribal people who have been working it for centuries. Because they haven’t had the land titles settled in their favour, the state claims it is the landowner but in actuality the people have owned the land for centuries. Then the state and the companies take over their land. Now their entire livelihood system goes and there is no provision to support that. The DFID’s Rehabilitation and Resettlement Policy does not recognise this reality.

And the DFID has funded and provided technical assistance to the expansion of the Hirakud dam. Initially, the plan was to supply water to farmers. But now what is happening? Farmers are not getting water. In 2004, 20,000 acres of land didn’t get water. In 2008, 50,000 acres of land didn’t get water.

Why is this happening? Because Hirakud water is being taken by the mining companies who have come to the state: by Vedanta for its aluminium plant, by the Jindals and by anyone who has an industry in Sambalpur. They have signed a Memorandum of Understanding which says that 478 cubic feet per second of water will be taken from the Hirakud to be given to these companies, which will mean another 50,000 acres of farmers’ lands will be unwatered.

They say that there is enough water from the Hirakud dam to supply to industry and people. People say the reality is they are not getting water. So this is a design to privatise water resources and infrastructure so those who are running mostly extractive industries will benefit.

And, if you come to the core point, what is the DFID’s understanding of development in Orissa? If you see the kind of development happening in Orissa at the moment, it means developing only industries and mineral-based industries. This is further reduced to four major minerals: coal, aluminium, bauxite and iron. In a state where more than 85% of the population live on agriculture, forestry and fisheries resources, do you think only mineral-based industries can be accepted as the model of development?

How many people in the state will benefit from this? All these minerals are water and energy intensive. Which is why the DFID and the World Bank wanted the energy, power and water sector reforms.

And one of the DFID’s first projects in Orissa was the power sector reform, which saw an American company take over part of the distribution supply?

Yes, it was claimed that people here did not have any knowledge or authority about how to reform the power sector so we needed a company to help us. Who decided which company would help? The DFID.

Orissa had a power sector board before the DFID came. Why was that not up to the task of providing electricity?

There was never any need for help from outside; there was knowledge with engineers and technical people guiding the board. But then the board was dismantled and restructured and the supply line decentralised and all this was designed with consultants engaged by the DFID. Decentralisation and privatisation go together. Decentralisation can mean further democratisation but this didn’t happen here. It means giv[ing] the power supply to private companies.

I have seen the reports on the power sector reform and written about it and I think any commerce graduate in accounting can do better accounting than the experts they sent.

What was the process?

The reforms were pushed by the World Bank and the DFID jointly. They dismantled the state electricity board. They created distribution companies. They also privatised the power generation corporation. They invited foreign bidders.

What have the consequences been?

Higher prices, lower returns to the state. The state is paying, people are paying; so who is gaining? The unit cost of electricity is going up and up. These companies are not paying back to the state. Last year, they spent more than Rs100 crore (£14.6 million) from the poverty eradication program coming from the centre to the state to support the power supply distribution.

So, this is ridiculous. Who is gaining? People are not gaining, so what is the meaning of these reforms? This is what people are asking: what is the meaning of the development they are proposing, and should the World Bank and the DFID patronise this? And for whose interest? Certainly not the interest of the state of Orissa.

Was there any resistance to this?

People are opposing mega projects at the local level. In certain areas of the state, such as the areas where the multinationals are trying to displace people, we are getting the real picture of the reforms and people are fighting back.

And there was a campaign against these destructive reforms in 2002 and for two years we campaigned against the World Bank and the DFID. Many organisations came together: progressives, socialist groups, trade unions, mass organisations. It was called the Campaign against Destructive Economic Reforms. All the privatisation attempts we challenged. We courted arrest. When the DFID and the World Bank were sitting with a group of consultants in the Hotel Crown we were demonstrating outside and there was a huge demonstration in front of the DFID office.

What was the response?

They said they weren’t doing anything on their own, that the Orissa State Government had invited them.

But they’re still here?

Yes, and each reform is part of a whole plan. They want to minimise the role of government and maximise the role of private players. It’s not possible to do that directly so you create a process where gradually government’s role is minimised and in come private players.

Where are the politicians and the political parties in this process?

We don’t have political parties. They claim to be political but they don’t try to understand people’s problems. They are not in tune with people. They only come out during election times and there is no difference between the ruling parties and the opposition. They are all the same. Nobody expects them to play a significant role so in mainstream politics and you don’t find anybody who is opposing this development paradigm. The left is opposing it but they don’t have a proper base.

In the last sixty years no political party has really thought about how to develop the state. Therefore anyone can come with a bag of dollars and say, ‘Do this and we’ll help you’. And many NGOs also attended the consultation sessions they had for these reforms.

Which NGOs?

Those NGOs that do not have any record of working with the poor. There are maybe a few NGOs that are critical, but one or two NGOs raising their voices doesn’t have any real significance. Ultimately, in the proceedings you don’t see any dissenting voices– it looks like they are all in unison. If there are exceptions they don’t get a seat at the table.

Mostly, the NGOs are with the state. Mostly, they are quite comfortable with the state and they don’t raise any critical questions. Some of them have been kicked out and blacklisted because they raised critical questions. ‘If you are not with us, you are with our enemies,’ that kind of thing.

So, should the DFID have played such a role in Orissa?

If the DFID hadn’t had a role, nothing worse would have happened.

But isn’t there an argument that says even if the DFID isn’t promoting the best policies, nonetheless money given by the British Government is providing money for things like healthcare that, given the lack of will of the main political parties, wouldn’t otherwise exist?

I think if you’re putting money in the wrong way it doesn’t make a good impact. For example, in health sector development they are often providing for infrastructure that isn’t being used, so what is the point in putting money in? It requires a social plan but there isn’t one. Health was never a priority sector for this state government. When somebody comes with a big money bag and says ‘I will support this’, the government will, of course, say, ‘Yes’. I’ll tell you one example. I was invited by a committee to inspect the city’s main hospital. I went there to see and discuss it with the chief medical officer. He took us to see the intensive care unit. It’s supposed to be the most active and dynamic unit. When we approached the unit, we saw a cat sleeping. We went in and saw six beds and life support units but there was no-one using them. All this equipment was bought because companies had been contracted for it, but there was no manpower to operate the machineries. He said the government wasn’t thinking about how to run it. And this is happening in all other areas. When the DFID and World Bank come in, the only concern of the state government is to buy equipment.

The Department for International Development is part of the British Government and foreign aid is presented very positively and is seen to be doing good.

Similar perceptions exist about our government. We Indians feel very proud that our government gives money to some smaller south Asian countries. The kind of damage they are doing we don’t take into account. But if governments and the people are genuinely interested to serve another community, the support must be totally unattached and unconditional. The most important thing is whether that state has a plan to develop itself.

I put this question to a government minister. I said try to recollect any time in the past when you have sat for two days to think about the state and how to develop it. He said they’d never done that. So if you’ve never thought about it, how can you have a plan? I don’t think it’s acceptable. In a democracy you have to plan from below and that is not happening.

Would that be possible with foreign aid?

Foreign aid should not be in the picture at all. In certain areas, if you lack resources maybe you could think about it. But have you explored all the resources at your disposal? Look at these mining companies that are coming in – they will pay a tiny amount of tax to the state on the resources they mine then sell. If any government did that, no funds would be required from outside. They are looking for the easy way out with foreign aid.


Abhay Sahoo is a leader of the people’s campaign fighting South Korean steel company POSCO in its attempts to displace people from their lands to mine the iron ore that lies beneath. He was interviewed in the village of Dhinkia in eastern Orissa. Richard Whittell: Why are you fighting to stop POSCO coming here?


Abhay Sahoo: As everyone knows in the year of 2005, on 22nd June, the Orissa State Government signed a Memorandum of Understanding with the company POSCO, of South Korea, to set up a steel mill, with investment of Rs 52,000 crore (approximately £7 billion).

Since then the people of the proposed area – in the three areas of Dhinkia, Gadkujang and Nuwagaon in the district of Jagatsinghpur – have been conducting this resistance struggle against the POSCO steel mill, and we have formed the POSCO Pratirodh Sangram Samiti (POSCO Resistance Struggle Committee), of which I happen to be the chairman, and have been conducting this battle against POSCO and safeguarding our motherland and fertile soil.

You see, we are not against industrialisation but industrialisation at the cost of a guaranteed agricultural economy. This area is a coastal area with very sweet sand, underground sweet water and it is full of sand dunes. The coast of the Bay of Bengal has a very special kind of sandy soil. People have been growing betel vine there which happens to be a most profitable item of agriculture and it is an employment generating agriculture. It gives a very handsome income to the cultivator’s family, and provides both direct and indirect employment. So people do not want to part with the betel vine cultivation. In addition, it is producing foreign currency for the state exchequer as it is an item of export. Apart from betel vine, people have cashew nuts which are also profitable items and apart from everything else, people have a very dense forest and a very beautiful ecology.

So, the people of the area have been struggling tooth and nail and heart to safeguard their motherland and fertile soil. It will be a very serious ecological catastrophe. Not only that,If the forest is not there, it will lead to more problems. The thousands of fishermen here depend on the sea mouth through which the entire surplus water is being drained. They catch fish there. And the paddy lands belonging to thousands of agricultural families will be submerged in water. And once the forest is gone, the sand dunes will be gone. There will be no sand dunes. It is the forest and the natural processes which have made the high sand dunes, not the man.

But the other side of the coin is that the company, in connivance with the administration, has imposed violence many times on the peaceful protestors against POSCO. We call this state-sponsored violence.
Do you have any evidence for these allegations of violence?

On 29th November 2007, the anti-POSCO people were on strike at the main entry point to the district. Hundreds of men and women were there, democratically and peacefully protesting against the POSCO officials. But POSCO hired anti-socials. Their officer, who was a senior civil servant, hired the anti-socials who took the help of the little pro-POSCO camp in the area. The district administration also extended its help and together they blasted seven bombs at the peaceful strikers.

Many innocent men and women were injured. Still people are suffering from those injuries in this village. And, as Dhinkia has become the bastion of the anti-POSCO struggle, as many as 450 men and women here have been implicated in more than 90 false legal prosecutions. For me, though I am from this block and this is my area of operation, I have been underground and unable to go to my native village and see my family for three years. Many of the anti-POSCO leaders have been underground for three years.

POSCO is trying to sabotage the movement, they are trying to suppress the movement. They have hired goons and anti-socials, they have started beating the anti-POSCO fighters, they have looted the anti-POSCO fighters’ houses and they have done many injustices to the anti-POSCO families.

In one thing POSCO has been successful and that has been in creating a pro-POSCO camp. They have politicised the struggle, they have tried to disrupt and they have tried to break the struggle.

But the more they have tried to break the struggle, the more people have become united because they have such affection for their own livelihood. There is a historic and dialectical relationship between life and livelihoods and our struggle is based on a scientific analysis of the livelihood aspect of this locality. So apart from everything, our struggle has withstood the situation The war is young.

After four months the Orissa Chief Minister and the POSCO chief announced they were to lay down their foundation stone on the 1st April 2008. On that day the patriotic forces from across the country were invited to be united and we broke all barricades erected by the police. So, the anti-POSCO people have come to the limelight and taken control of every village again. If they come into this area they will face mass obstruction and mass demonstrations.

Now the government has suspended many anti-POSCO fighters who have been in government service. In Dhinkia, they have suspended one central government employee who was a postmaster and they have suspended a high school teacher. They have taken revenge on anti-POSCO families and have started an economic blockade. They have stopped supplying commodities, such as kerosene, sugar and rice.

So these are the things we are facing. But, to achieve our objective and to champion the cause of the people, we must lead this struggle to its logical conclusion until POSCO is forced out.

What has the DFID’s role been in this?

One thing is very clear: the DFID is dictating the principles and the rules of the state government. The DFID is putting tremendous pressure on the government to invite the multinational companies and private companies, to go for the private sector, domestic or foreign. And the DFID is very keen on privatising all the government and public sectors.

What is your opinion of the proposals contained in the DFID-funded Rehabilitation and Resettlement Policy?

As you know, the state government has adopted the Rehabilitation and Resettlement Policy 2006, which it claims is the best one, and POSCO has announced some additional packages.

The policy means that one who loses the homestead and agricultural land will be given due compensation for the recorded land as per the value of local area and he will be given, if displaced, three rooms for his family and will be given employment in the company or, if he doesn’t have requisite qualifications, will be given compensation.

There are many people living here who do not have formal property rights to the land they are living on and are technically living on government land. What will they get from the policy?

They won’t get anything. The company says the government is the owner, so there is nothing to give the people who are living on the land. And to satisfy people, POSCO has announced an additional package of Rs 6000 per decimal of land. But that is nothing for the betel cultivator and people are not interested.

So, if the Rehabilitation and Resettlement Policy was implemented, people who do not have their own land would not be compensated?

You see one thing. You can come to a very scientific conclusion if you know the structure of the land. POSCO is to acquire 4,004 acres of land. There is a population of 22,000 with 4,000 families. And out of the 4,004 acres, 3,566 acres are government land!

The 2006 Rehabilitation and Resettlement Policy is an anti-people and anti-development policy. And the state government has written it under instruction of the DFID. You see, the Rehabilitation and Resettlement Policy is not meeting the demands of the displaced and affected people; the employment aspect, displacement aspect and the compensation for land losers. People are suffering and will suffer more if they accept the Rehabilitation and Resettlement Policy 2006.

The company has not yet acquired an inch of land and we have refuted this Rehabilitation and Resettlement Policy, which has been formulated in connivance with the DFID. It is not a welfare policy for the people. And our movement is 100% opposed to this policy. Not only is this the policy of the state government, but it is also the policy of the DFID.

After this interview, one man was killed in clashes with Pro-POSCO supporters. Abhay Sahoo was arrested and held for ten months on a variety of charges. He was recently released on bail.


POSCO has not yet been able to start construction. See for updates.

Please also see the interview with Orissa teachers’ union secretary Abani Baral in>Part III of Dodgy Development for more background to the DFID’s entry into Orissa.

See also:

Dodgy Development: Films and interviews challenging British aid in India

Dodgy Development VI: False promises June 25th, 2010

Dodgy Development V: Power to the people? May 05, 2010

Dodgy Development III: A DFID Education April 09, 2010

Dodgy Development II: Smile for the camera February 25, 2010

Dodgy development: DfID in India January 28, 2010