Privatisation of NMDC’s steel plant at Nagarnar village in Bastar raises serious legal issues

steel plant



Shri Anil Kumar Jha

Union Tribal Affairs Secretary


Shri Alok Tandon

Union Mines Secretary


Shri Amitabh Jain

Chief Secretary



Dear S/Shri Jha, Tandon and Jain,

I understand that NMDC’s steel plant near Nagarnar in Bastar district of Chattisgarh has been demerged from NMDC and the Centre is fast-tracking its privatisation.

There are some important legal concerns that arise in this, as explained below.

  1. To the best of my understanding, the entire stretch of Bastar district in Chhattisgarh comes within the area notified under the Fifth Schedule to the Constitution. As such, the provisions of the Panchayats (Extension to the Scheduled Areas) Act [PESA] are applicable to decisions taken that impinge on the lives of the local tribal communities. This Act mandates that decisions on such matters as privatisation of NMDC’s steel plant there, should not be taken without a prior discussion by the local tribal Gram Sabhas and without their prior consent. Apparently, the decisions taken in this matter by NMDC, the Union Mines Ministry and the Union Finance Ministry have been unilateral, not based on any prior consent from the Gram Sabhas, as required under the PESA. As such, such decisions are prima facie violative of the PESA.
  2. NMDC being a public sector enterprise is subject to reservation for SCs/STs/OBCs as per the orders of the government issued under Article 16 of the Constitution. The format of disinvestment as adopted by the Finance Ministry (DIPAM) does not provide for continuing those belonging to the SCs/STs/OBCs in employment, once the public sector enterprise is privatised, which runs counter to the scheme of reservations. Once the steel plant is privatised, if the private promoter chooses to discontinue the services of such employees, the government should ensure that they are continued in NMDC’s employment, as otherwise it would be violative of the provisions of Article 16 and the regulations issued in pursuance of it.
  3. Privatising NMDC’s steel plant closes the door for reservations for SCs/STs/OBCs in the future, which will not only have an adverse impact on their employment opportunities but also run counter to the idea of empowering them through public sector employment. This calls for a wider discussion with the State and in the Parliament, as it will have serious socio-economic implications for the region.
  4. More than 1000 acres of land had been acquired for the steel plant under the erstwhile 1894 land acquisition legislation on the ground that it was required for a “public purpose”, a term defined in Section 3(f)(iv) of that Act as ” the provision of land for a corporation owned or controlled by the State;”. In other words, the land so acquired and handed over to the NMDC cannot be transferred to a private company, as such a transfer would violate the above cited provision. If the Central government chooses to go ahead with privatisation of the steel plant, the entire extent of land will revert to the State.  This renders the privatisation process legally invalid.
  5. When land was originally acquired for NMDC’s steel plant, there was widespread opposition from the local tribal families. Land was forcibly taken from them on the ostensible ground that it was required for a public sector company. The decision to privatise the steel plant now, along with that land, would therefore constitute a breach of public trust on the part of the government.
  6. The above concerns revolve around the role of a public sector enterprise such as NMDC. Public sector enterprises are deemed to have been set up under Article 19(6)(ii) of the Constitution. Read with Article 12, such public sector enterprises are the arm of the State and they are State’s instrument to further the welfare mandate spelt out in the Directive Principles. By privatising such enterprises, the Centre is reneging on that Constitutional obligation. It is therefore imperative that the Central government, instead of taking unilateral decisions to privatise the public sector enterprises, seeks the considered views of the Parliament and the States before proceeding further.


I request you to place these concerns of mine for consideration at the highest level at the Centre and in the State.




Yours sincerely,


E A S Sarma


(Former Secretary to Govt of India

& former Commissioner for Tribal welfare in erstwhile undivided AP)



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