India’s big business families have seen vastly different operating circumstances in the last two decades where some have been unable to meet new competition while others have expanded their scope away from the traditional, protected sectors they used to enjoy and into new consumer and business segments (Kochanek 2007). It is therefore possibly no surprise to see Jindal South West, a subsidiary of the Haryana-based OP Jindal Group, expand away from steel to not only aluminium but also cement and power production.
From two small pipe manufacturing units in 1952, in West Bengal and Haryana respectively, the Jindal Group expanded into steel as recently as 1970 but has since grown strongly to become a 10 billion USD industry, enough to place the family as the 12th richest in India in 2008 with an estimated fortune of 2.9 billion USD (Karmali 2008). There are at present 12 steel plants in India and 2 in the United States. The Jindal Group is effectively operated in four main sub-groups of companies by the sons of founder OP Jindal and had been so even for some years before his passing away in 2005.60 Since OP Jindal’s death his wife Savitri Jindal has assumed the role as Group chairman.
Within the company the brothers hold considerable political and business connections between them although they remain more low profile than other business groups like Reliance, Tata or Birla. Congress Lok Sabha MP from Haryana Naveen Jindal, head of Jindal Steel, provides for top political connections and is said to be part of the group of young Congress MPs close to Rahul Gandhi. The JSW chairman Sajjan Jindal was the head of the Associated Chamber of Commerce (Assocham), one of the top three national business organisations in India, when the bauxite project was proposed in Andhra Pradesh.
JSW Steel is not only the main company of Jindal South West, but also the biggest company of the entire Jindal Group, and has grown to become India’s largest domestic producer just ahead of Tata Steel. JSW is, unlike the Delhi-based Jindal Group, headquartered in Bombay. Its 8,500 employees (as of 30th June 2009) operate in a number of locations across India, with a major presence in Karnataka. Two of the JSW companies are listed on the Bombay Stock Exchange, JSW Steel and JSW Holdings, with JSW Energy planned to be listed shortly (JSW Energy 2008).61
60 The four separately run companies are apart from JSW, Jindal Stainless (JSL), Jindal SAW and Jindal Steel &
Power.
61 The main companies of the JSW Group are JSW Steel, JSW Energy, JSW Cement, JSW Aluminium, JSoft
Another new major venture for JSW is the subsidiary JSW Cement which is also planning to start operations in Andhra Pradesh. A separate subsidiary, JSW Aluminium is responsible for the new bauxite industry project in Andhra Pradesh.
The many new projects that are ongoing at JSW are sure to put immense pressure on its finances.
Steel and power investments alone are expected to require 40,000 crore rupees (£5 billion) in
“the next few years” causing the cement section to recently announce it would look for a partner for its limestone mining and cement plant in Andhra Pradesh (Kalesh 2009). Financing of the 4,000 crore rupee (approximately £500 million) alumina refinery has reportedly been agreed on via 1,000 crore internal company equity, and 3,000 crore from a domestic bank consortium (Rama Raju 2009). But adding uncertainty to this announcement was another media statement saying that despite this the aluminium plans would go slow until the market picked up (Joshi Saha 2009). Is this a strategic move when the bauxite mines are not moving forward to give JSW time to see progress before it makes further investments? Or are the overall finances of the group constrained enough in the current economic downturn to warrant a focus on steel production and power generation? One clear set of priorities should come from the fact that if the group does not have power it will find it difficult to run its other plants.
A number of steel and power projects come with similar uncertainties to the bauxite project such as issues of land acquisition, environmental approvals and access to coal. At a time when Tata Motors was struggling to acquire land for its car factory in West Bengal, JSW was quick to come out with its success formula: “We dealt directly with the farmers and made them partners”, Sajjan Jindal told Tehelka in August 2008 (Guha Ray 2008). Since this experience in did not match company behaviour during the refinery land acquisition (see chapter 5) it was no surprise, although another great tragedy for the people affected, when protests and violence erupted later (Datta 2009).
The bauxite MoU with the AP government chose to emphasise the capabilities of JSW in general rather than its knowledge of aluminium production:
The [JSW] Group has rich experience in mining, ore transportation, metallurgical processing, refining, smelling, rolling of metals (ferrous and non-ferrous), power generation, port operation and industrial gases … It is clear that the Jindal group has the financial capacity, the organizational strength and the operational experience to set up large capacity, value addition plants of refining and smelting of bauxite ore (MoU between GoAP and JSW 2005, 2).
JSW did recruit experienced staff such as the CEO of JSW Aluminium RC Swain, a former Assistant Vice President of Vedanta Alumina, but most work was seemingly performed by consultants who carried out surveys and performed various other tasks. The company even chose to operate without a permanent office in the area, instead using a few rooms of the housing estate for employees of the Jindal Ferro-Chrome factory on the outskirts of Visakhapatnam city.
A local consultancy did the ground survey for both refinery and mine and one of its employees later became the site manager at S Kota as their only on site employee. Site preparation and plant construction work had been outsourced to specialist companies (including a large Indian engineering firm for ground preparation and a large multinational company as technology supplier) (Interviews JSW employees 5/4 2008). Regardless of who actually carried out the work, the presence of JSW was felt when its name appeared on the official land acquisition map for the refinery despite the MoU assuring this ‘work’ was part of the government’s tasks (See Figure 5 on page 128). And for the mining EIA it was JSW who supplied the government documents to the EIA consultants. Evidence of this was the company office fax number left on the top of each page (Indian Council of Forestry Research and Education n.d.). JSW thus could be seen as functioning much like a back office which processed and distributed information between the government departments and consultants which needed to carry out various administrative tasks.
If the private company was supposed to be the industry expert in the government-business alliance, this expertise seemed limited to providing finance and coordinating with the government and consultants/suppliers. This style of operation was described as common among the private mining and metals companies in India by an activist in Delhi who stated that ‘basically all these mining companies do the same; they stay away from doing actual work. Vedanta has contracted an Australian company to build their refinery and will then subcontract the mining to smaller companies. They only manage the money (Interview activist, Delhi 11/12 2007).’ For the opposition to the AP bauxite project, JSW was a name without a face, a company coordinating work behind the scenes without ever showing itself. The characterisation of the ‘highly competent and financially sound entrepreneur’ of the MoU is thus of a company venturing into a new line of business with limited in-house experience or even presence in the State, but an ability to mobilise the required resources; economic, technical and political. At least this was until the economic crisis of late 2008 changed world market demand and thereby project financing possibilities (see e.g. (Joshi Saha 2009; Rama Raju 2009) on the uncertainty over JSW’s ability to raise funds for the project).