Some of India's most mineral-rich states are also its poorest, lagging behind in almost every measure of economic performance. While one can assign several reasons for their poor showing, like bad governance, rampant corruption and lack of investment, the lion's share of the blame has to go to the states' inability to exploit the abundant mineral resources for economic progress and prosperity. States such as Bihar, Orissa, Madhya Pradesh and more recently Chhattisgarh (which was carved out of Madhya Pradesh five years back) have been virtually sitting on mountains of mica, coal, lignite, iron ore, bauxite, manganese and aluminium for decades without doing much to take advantage of these reserves. Even Jharkhand, arguably India's most resource-laden region, has only a few islands of prosperity to talk about. And that too is really because of a single steel plant and its adjoining township in Jamshedpur, where the Tatas invested way back in 1908.

Orissa, for instance, has 90 per cent of India's chrome ore and nickel reserves, 70 per cent of bauxite and 24 per cent of coal reserves. Yet, more than 47 per cent of its population lives below the poverty line (that is, on incomes less than Rs 16,000 a year, according to Word Bank estimates). This anomaly becomes starker when you consider that companies that want to set up steel, aluminium and coal-based power projects have really very little choice in terms of where to build them. States like Orissa and Chhattisgarh, which have rich mineral deposits but are also among the poorest, are the obvious choice.

Yet when opportunity knocks, few states take advantage. Often in their eagerness to exact the pound of flesh, they create so many roadblocks that it becomes virtually impossible for companies to remain interested. Sometimes these hurdles are because of archaic rules and regulations that aren't in consonance with the new market dynamics. We aren't suggesting that existing rules and policies be changed to accommodate the whims and fancies of every new player. But there has to be scope for negotiation and give and take.

Resource-rich states like Orissa must weigh the benefits of new investments when they apply conditions for new projects like the Rs 45,000-crore ($10-billion) steel factory that South Korea's Posco wants to build in that state. The multiplier effect of such an investment, even if it is over 10 years, has the potential to change the face of one of the poorest states in the country. Yet, the state government continues to dither over the decision, with Posco's intention of exporting some of the iron ore to its global network becoming a thorny issue.

The fact is that the Indian mining industry has been one of the last to reform. Part of the blame lies with the Centre, which enacted the Mines and Mineral (Development and Regulation) Act, 1957, and the Mines Act, 1952, which together constitute the basic law for the mining sector, with the states themselves having little say. It was only in 1994 that the sector was opened up to foreign investment (only for 13 specified minerals) and states were given some say in the policies governing their own resources. This delay (in opening the sector) is rather difficult to comprehend, given that these "poor states'' neither had the money nor the technical wherewithal to exploit the abundant mineral wealth. Ascribe it to xenophobia and a hangover from the days of pursuing "self-reliance" when foreign investment was synonymous to outsiders plundering India's natural resources.

That even after 57 years of independence any debate on foreign investment can raise the hackles of ideologues is curious but real and happens across the spectrum of Indian politics. The Right sees foreign investment in many industries as impinging on indigenous enterprise; the Left is paranoid about the rebirth of colonialism in economic terms. Both, in our view, miss out on reaping the benefits of globalisation. If Orissa continues to sit on its abundant mineral resources, like it has for more than half a century of modern Indian history, it can kiss goodbye to climbing up the prosperity ladder. On the other hand, if it invites skilled and deep-pocketed foreign players like Posco to unleash the power of such resources, everybody benefits.

Finally, it is not quite clear why governments are apprehensive about foreign companies whisking away India's natural resources. Pragmatic contracts, which give as well as take, can easily work around the most intractable of commercial interests between two parties. Lastly, as a guarantee to protect the interests of its people, a government can always invoke its powers to take over assets of MNCs if it thinks it harms its interests, like it did Esso (now Hindustan Petroleum) in 1976 and Burmah-Shell (Bharat Petroleum) in 1981. With little to lose and a lot to gain, states like Orissa should turn on the green lights for foreign investment.