VZCZCXRO6929
PP RUEHBI RUEHCI
DE RUEHCI #0164/01 1361228
ZNR UUUUU ZZH
P 161228Z MAY 07
FM AMCONSUL KOLKATA
TO RUEHC/SECSTATE WASHDC PRIORITY 1550
INFO RUEHNE/AMEMBASSY NEW DELHI PRIORITY 1469
RUEHCG/AMCONSUL CHENNAI 0645
RUEHBI/AMCONSUL MUMBAI 0640
RUEHKA/AMEMBASSY DHAKA 0416
RUEHKT/AMEMBASSY KATHMANDU 0422
RUEHIL/AMEMBASSY ISLAMABAD 0341
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEIDN/DNI WASHINGTON DC
RHMFIUU/CDR USPACOM HONOLULU HI
RUEHCI/AMCONSUL KOLKATA 1911

UNCLAS SECTION 01 OF 02 KOLKATA 000164 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EIND EINV EAGR EMIN ASEC IN KS
SUBJECT: EAST INDIAN STATES SEE PROTESTS AGAINST RETAIL AND MINING 
INVESTMENTS 
 
REF: A)  KOLKATA 0145   B)  KOLKATA 0140    C)  KOLKATA 0104   D) KOLKATA 0088 
 E)  KOLKATA 0092    F)   KOLKATA 0041 
 
¶1. (U) SUMMARY:  On May 12, two states in East India experienced 
several protests against investments by large corporations.  In 
Jharkhand's state capital Ranchi, small scale food vendors 
attacked newly-opened Reliance Fresh supermarkets fearing that 
that the lower cost retail markets would destroy their 
livelihoods.  On the same day, villagers in the neighboring 
state of Orissa detained three Indian officials of the Korean 
Pohang Iron and Steel Corporation (POSCO) who were trying to 
persuade farmers to sell their land for a planned multi-billion 
dollar steel plant (Ref. B).  While separate issues in different 
states, the recent agitations against large commercial projects 
reflects a continuing tension in the region over investment and 
economic development versus the perceived interests of India's 
poor and the informal business sectors.  END SUMMARY. 
 
 
 
--------------------------- 
 
Anti-Retail Rage in Ranchi 
 
--------------------------- 
 
 
 
¶2. (SBU) On May 12, Matia Mazdoor Sangh (a union of vegetable 
vendors in Ranchi) leader Uday Shankar Ojha, followed by at 
least 2,000 vegetable vendors and middle-men, (between the 
farmers and the wholesale market) attacked three recently-opened 
Reliance Fresh supermarkets owned by Reliance Industries Ltd. 
Store windows were broken, equipment destroyed and goods and 
produce smashed to protest against the entry of the new 
supermarkets in Jharkhand.  Over a dozen people were injured 
during the violence but the local police simply stood by and 
watched rioters tear the stores apart.  The police only 
attempted to control and disperse the crowd after four hours, 
when they were about to raid a fourth outlet.  The police 
finally arrested just six people, including Uday Shankar Ojha. 
 
 
 
¶3.  (SBU) Since February, Reliance Fresh has set-up four retail 
shops in Ranchi and is in process of establishing a fifth one. 
It also has plans to open soon five retail shops in the steel 
city of Jamshedpur and four in coal city of Dhanbad.  Ojha 
believes that at least 10-15 thousand vendors in Jharkhand's 
larger towns of Ranchi, Jamshedpur, Dhanbad and Bokaro will soon 
be jobless as Reliance Fresh is purchasing the vegetables 
directly from the farmers and in turn is selling the produce at 
much lower prices than the small vendors.  In the past, Ojha had 
unsuccessful stints as a politician with populist parties like 
Samajwadi Party of Mulayam Singh Yadav and Lok Janshakati Party 
of Ram Bilas Paswan.  Observers in Ranchi commented that Ojha is 
now supposed to be close to Jharkhand's ex-chief minister 
Babulal Marandi's Jharkhand Vikas Morcha. 
 
 
 
¶4. (SBU) Senior Vice President and Mentor of Reliance Fresh 
Prabhat Sinha (please protect) in Ranchi told Post that these 
incidents are initial teething problems and can be sorted out. 
He added that "The farmers are happy as their market is assured 
and they are getting a much better price for their product." 
Also, well placed sources in Ranchi told Post that "The incident 
took an ugly turn as Reliance failed to pay a bribe of Rupees 
10,000 (USD 250) each to the nearby three police stations [for 
protection].  Since they were not paid, the police never 
responded to the situation when the violence erupted.  They 
stood there like mute spectators."  Police contacts rationalized 
their inaction to Post by claiming Reliance Fresh had not lodged 
a complaint nor informed the police of the protests and added 
that they responded as soon as they received a complaint. 
 
 
 
¶5.  (SBU) The Ranchi incident showed that the entry of large 
corporations into India's fragmented USD 200 billion retail 
business is not likely to be smooth.  Organized retail in India 
is just about 5 percent of the overall retail sector and 
 
KOLKATA 00000164  002 OF 002 
 
 
Reliance plans to invest USD 5.6 billion, hoping to dominate the 
industry before foreign players can enter.  Reliance is not put 
off by the demonstrations and a senior Reliance official told 
Post that the company has to "negotiate" with the protesters. 
 
 
 
-------------------------------------- 
 
Korean Steel Standoff in Orissa 
 
-------------------------------------- 
 
 
 
¶6.  (U) Also on May 12, while vegetable sellers in Ranchi were 
agitating against the activities of an Indian corporation, in 
neighboring Orissa angry protestors in Govindpur village 
(Jagatsinghpur district) detained three Indian officials of the 
Korean steel giant POSCO.  POSCO is planning to invest USD 12 
billion to develop a 600 million-ton iron ore mine and 12 
million-ton-a-year steel plant.  POSCO acquired 14.85 million 
square meters of a 16.50 million square meter site.  However, it 
is unable to acquire the remaining 1.65 million square meters 
because of the opposition of nearly 4,000 families in three 
villages that are facing displacement to make way for the steel 
factory. 
 
 
 
¶7.  (U) When POSCO's officials visited the project site to 
convince local people about the benefits of the new development, 
agitated villagers surrounded the three officials and refused to 
let them leave.  One woman in the group was released after three 
hours and the rest were freed after 10 hours, with the promise 
that they would not return.  According to POSCO, the plant would 
benefit locals in providing employment to 20,000 people and 
indirectly provide jobs to another 870,000. 
 
 
 
¶8.  (SBU) COMMENT:  These two incidents are indicative of the 
difficulties new commercial initiatives - Indian or foreign - 
face in developing India's markets and industry.  In both cases, 
the corporations had mandatory clearances and support from local 
governments but they did not gain the confidence of local 
stakeholders.  (In the case of Reliance, one overlooked 
stakeholder was apparently the local police.)  This was also 
true recently in neighboring West Bengal, where the state 
government had to back out of a lucrative SEZ project in the 
rural Nandigram district when it faced local resistance.  The 
success of various groups in blocking commercial plans has 
served to embolden others to question projects as well:  i.e. 
protests in West Bengal against a TATA car factory in Singur 
appears to have contributed to tensions in Nandigram, which has 
inspired villager agitation in Orissa against POSCO and more 
such clashes will likely flare-up elsewhere.  The lesson for 
companies hoping to implement large-scale projects to take from 
this backlash is that they will have to engage early and 
extensively with the affected communities and cannot rely on 
often incompetent and corrupt local governments to mediate 
disputes or land acquisition for them.  The companies themselves 
have to sell the message as to the benefits of their investments 
to an often skeptical public. 
JARDINE