Pohang Iron and Steel Company (POSCO), the third largest steel producer in the world, is in the process of booting up a $12 billion dollar iron ore project in the state of Orissa. This marks a sharp 400% increase in the upper limit of foreign direct investment (FDI) making it the largest instance of foreign investment India has ever seen.

POSCO expects to output some 600 million tons of iron ore over the course of the 30-year lease approved by the Orissa government in 2005. Mining is slated to begin in 2009 and the South Korean company expects to create 18,000 jobs over 10 years.

The physical infrastructure to be built includes a plant and a port which require a total of 4,004 acres. Till date, POSCO has gained control of less than 10% of that figure despite offering employment and other forms of compensation to the 4,000 families facing displacement.

In large part this is due to the organized response of the POSCO Pratirodha Sangram Samiti (PPSS), an organization that began in 2005 when its leader, Abhaya Sahu, empowered by only a rickshaw-mounted microphone went from village to village building support.

Since then, the public counter-POSCO effort has been gaining steam by aligning itself with environmentalists who argue that the port will disrupt local ecology and NGO’s who argue that the livelihood of fishermen and farmers is at stake.

In addition to the political track, PPSS members have taken to preventing encroachment by state or corporate officers by guarding village entrances with bamboo sticks.

This marked the beginning of a transformation towards a more combative approach:

• In May of this year, a vehicle carrying three Indian POSCO executives was swarmed by 10 villagers with sticks. The corporate officers were taken captive and were released the same day when POSCO promised not to send anymore staff to the area.
• On October 11, 10 laborers bound for the project site were kidnapped by the PPSS.
• On October 13, four POSCO executives – three South Koreans and an Indian – were swarmed and taken prisoner by a crowd of 40-50 armed villagers while dismounted. Their vehicle was pushed into a ditch, again no reward was demanded, and the corporate officers were freed when the local police promised that neither state nor POSCO staff would enter PPSS controlled areas.

Due to the potential for enormous payoff POSCO will likely press on with its efforts despite excruciatingly slow progress and localized unrest. To deter POSCO, PPSS has to make it economically inviable to pursue construction and later, production. The increasingly activist posture reflects that, to some degree, this understanding is taking hold. The only question is what form this economic deterrence will take.

Update: The 10 laborers taken prisoner four days ago on their way to build a bridge at the project site have been released after the government gave in to the PPSS demand that the unused timber be removed and the project not be restarted.

Update 2: Private intelligence firm Stratfor tracks the same topic here.

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