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UNCLAS SECTION 01 OF 03 CALCUTTA 000066 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV ECON ASEC EIND EMIN SOCI PHUM IN
SUBJECT: MINERAL RICH JHARKHAND SUFFERS INSURGENCY AND POVERTY 
 
REF: CALCUTTA 0006 
 
¶1.  (SBU) February 5-8, CG visited the Eastern Indian state of 
Jharkhand to assess the economic development, security, 
religious freedom and the political situation.  A new state, 
established only in 2000, Jharkhand is still experiencing 
serious growing pains.  The National Democratic Alliance (NDA) 
government is unable to respond to an increasing Maoist 
insurgency and its efforts to promote investment by signing over 
40 memorandums of understanding (MOUs) with various companies to 
exploit the state's extensive mineral resources are unlikely to 
see immediate results.  The GOJ's lack of a compensation plan 
for the many tribals, who are likely to be displaced by any 
mining and manufacturing, is further antagonizing this already 
alienated community which constitutes 28 percent of the state's 
population.  The weak NDA government under 37 year-old Chief 
Minister (CM) Arjun Munda relies on 6 independent Members of the 
Legislative Assembly (MLAs) who have received key ministerial 
portfolios.  Munda's effort to implement the Bharatiya Janata 
Party's (BJP) pro-Hindu platform by proposing an Anti-Conversion 
Law to discourage Christian missionary activity in the state is 
exacerbating his tense relations with the Independent ministers 
of the cabinet.  One bright spot in this bleak picture is the 
model industrial city of Jamshedpur, where Tata Steel, Tata 
Motors and other manufactures have a large presence.  U.S. 
manufacturers Timken and Cummins and other companies are 
experiencing excellent growth and predicting significant future 
expansion in Jharkhand and throughout India. 
 
------------------------- 
Jharkhand, Spawn of Bihar 
------------------------- 
 
¶2.  (U) In 2000, the Eastern state of Jharkhand was carved out 
of India's poorest state, Bihar, as the Bihar government was 
unresponsive the interests of its southern region.   Sandwiched 
between Bihar and India's second poorest state, Orissa, 
Jharkhand has social statistics equally as dismal as its 
neighbors.  Of its approximately 27 million people, 44 percent 
live below the poverty line.  In rural areas, the figure is as 
high as 58 percent.  (Note: In comparison, Jharkhand's poverty 
rates is more than double states like Maharashtra and Tamil 
Nadu, with approximately 25 and 21 percent poverty 
respectively.)  Jharkhand's 30 tribal groups, which constitute 
approximately 28 percent of the population, represent a 
significant portion of the rural poor.  However, Jharkhand has 
great potential for economic development.  The state possess 33 
percent of India's coal reserves and 34 percent of its iron ore 
and copper.  As a result of its mineral riches, several 
multi-nationals have proposed large investments in the state in 
the past year.  Mittal Steel signed an MOU of US $9.3 billion to 
establish a 12 million ton per annum steel plant and Jindal 
Steel has agreed to invest US $ 2 billion. 
 
------------- 
Maoist Threat 
------------- 
 
¶3.  (SBU) Jharkhand may never see the benefits of future 
investment if the growing Maoist insurgency is not addressed. 
All contacts, whether business, NGO or political figures, agreed 
that the Maoists constitute a serious threat to the state's 
development.  Of the state's 22 districts, approximately 17 have 
a Maoist presence.  Reportedly 550 people have died from Maoist 
violence in the last five years.  The highest insurgent activity 
is in the rural areas on the border with Orissa, Bihar and 
Chhattisgarh.  Reflecting the lack of government focus and 
response to the issue, the exact number of Maoist cadre is not 
known but most contacts felt active members ranged from 500 to 
1,000, with many more supporters, possibly a few thousand.  In 
districts along the border with Chhattisgarh and Orissa, the 
Maoists have effectively created a shadow administration in the 
remote villages.  CG asked CM Munda and Chief Secretary M.K. 
Mandal whether the GOJ had a plan to address the Maoist threat. 
Neither could offer a specific response, other than to say that 
more development was needed.  Reflecting the continuing threat, 
during the short period of CG's visit to Jharkhand, a railway 
station in West Singhbum district was blown-up and area 
commander of the Communist Party of India-Maoist (CPI-Maoist) 
Surajbhan Kajal threatened to begin attacks in the state capital 
 
CALCUTTA 00000066  002 OF 003 
 
 
Ranchi. 
 
---------------------- 
Tribal Dissatisfaction 
---------------------- 
 
¶4.  (SBU) Complicating efforts to address the Maoist problem is 
the growing disaffection of the sizeable tribal community in the 
state.  While the tribals represent a significant portion of the 
population, their numbers have not resulted in economic or 
political power.  The tribals' lack of development has allowed 
the Maoists to make inroads into their communities.  Tribal 
representative group Jharkhand Mukti Morcha (JMM) Secretary 
Shailendra Bhattacharya told CG that the tribals are also afraid 
that the large steel and mining MOUs will worsen their 
situation.  He said that much of the proposed mining would be in 
tribal areas and cause serious displacement for the community. 
In addition, the GOJ had no clear compensation plan. 
Bhattacharya's views were echoed by BJP Rajya Sabha Member Ajay 
Maroo and Tata Steel Deputy Managing Director A.N. Singh. 
Bhattacharya said the tribals were not necessarily opposed to 
development but felt that the GOJ, noted for corruption and 
inefficiency, would not protect the tribals' interests.  Rather, 
JMM wanted to deal directly with the companies.  Tata Steel's 
A.N. Singh indicated the same reservations about working through 
the state government and believed direct communications between 
companies and tribals was best.  (Note: Tata Steel is still 
dealing with the fallout from last month's violence between 
Orissa police and tribals in Kalinga Nagar (Reftel)). 
 
--------------------- 
Political Instability 
--------------------- 
 
¶5.  (SBU) The NDA coalition ruling Jharkhand, while struggling 
with serious social issues, also faces internal divisions.  The 
dominant BJP has just 30 seats in the 81-Member Legislative 
Assembly and requires support from 6 Independent MLAs and 6 
Janata Dal (United) members to retain power.  Using their 
leverage to extract key portfolios, the Independents hold the 
Home Ministry, Rural Development and other lucrative positions. 
Even with these perks, according to State Congress President 
Pradeep Balmuchu and BJP member Maroo, the Independents are 
wavering and only two need to pull out to bring down the 
government.  Like their state, the ministers are all very young 
and relatively inexperienced.  Home Minister Sudesh Mahato is 28 
years old, the Rural Development Minister Anosh Ekka 32 and even 
Chief Minister Munda is only 37.  A former security guard, Munda 
was a political non-entity until he left the JMM and joined the 
BJP in 1999.  Just four years later, he was selected by the BJP 
to be CM in March 2003.  Munda as an ethnic tribal was 
considered a suitable public face for the BJP and sufficiently 
malleable. 
 
¶6.  (SBU) Attempting to push the BJP's agenda in Jharkhand, 
Munda proposed in December an Anti-Conversion Law to ostensibly 
restrict forced religious conversions.  However, the law is 
widely understood to be directed against the activities of 
Christian missionaries in the state.  In his meeting with the 
CM, CG expressed reservations about the intent of the proposed 
Anti-Conversion Law.  The CM gave a one word response, saying 
that it was "politics."  Leaving the CM's office, Principal 
Secretary to CM U.K. Sangma said he was a Christian and did not 
 
SIPDIS 
believe that the GOJ would push the law forward.  Rural 
Development Minister Ekka, also a Christian, told CG that with a 
constituency of 90 percent Christians, he would not support the 
bill.  The consensus of most contacts was that the bill would 
not go forward as it would create a rift with Independents. 
Munda had floated the idea for the bill on the orders of the BJP 
national leadership but will not push it, to avoid a clash with 
his coalition partners. 
 
------------------------------------ 
Economic Opportunity for US Business 
------------------------------------ 
 
¶7.  (SBU) The model industrial town of Jamshedpur offered the 
one bright spot in an otherwise bleak picture of poor 
development and weak governance.  Jamshedpur, founded by the 
 
CALCUTTA 00000066  003 OF 003 
 
 
Tata industrialist family in 1907, is home to a massive 
industrial center, with steel factories, Tata Motor's truck 
factory and a host of ancillary factories and industries.  While 
in Jamshedpur, CG visited Tata's facilities and two U.S. 
companies: Tata Cummins and Timken.  Tata Cummins is a joint 
venture between Tata Motors and diesel engine manufacturer 
Cummins of Indiana.  Tata Cummins produces all the diesel 
engines for Tata's truck, and commands a market share of around 
70 percent in the commercial vehicles segment. 
 
¶8.  (SBU) Ohio-based Timken, originally in a joint venture with 
Tata Steel but now independent, manufactures precision bearings 
for railroads, large vehicles and industry.  Its largest client 
in India is the railroads.  Tata Steel, Cummins and Timken all 
described a situation of strong profits and significant 
projected growth in Jamshedpur and throughout India.  Tata 
Motors had a 24 percent growth in profits in the last quarter. 
Cummins currently produces approximately 69,000 Cummins B Series 
engines a year. Under the agreement with Tata Motors, Cummins 
will increase its total engine production to 100,000 units in 
2008 and 120,000 units thereafter.  Timken, with revenues of $57 
million, expects to grow to $200 million through acquisitions 
and product line expansion by 2008. 
 
------- 
Comment 
------- 
 
¶9.  (SBU) Jharkhand still suffers the effects having once been 
part of notoriously corrupt Bihar.  Years of poor governance 
have left the state with great poverty and weak leadership. 
However, Jharkhand does offer excellent economic potential given 
its great natural resources.  Companies, like TATA, Cummins and 
Timkin, that are already established in the state are doing 
well.  The NDA government will need to do more in combating the 
Maoists, addressing the concerns of tribals and rural poor, and 
implementing the MOUs for increased investment.  Otherwise, 
Jharkhand will remain mired in poverty and provide a base for an 
increasingly bold Maoist insurgency in Eastern India. 
JARDINE