India’s Orissa mine approval could be a litmus test

Financial Times, May 4, 2010
Within a month New Delhi will make a judgement over whether Vedanta, the UK-listed mining company, should go ahead with a big bauxite mine in Orissa, in the east of India.


The mine’s future is a test case of what approach the Indian government will take to defuse rising tensions between mining companies and rural communities in the world’s fastest growing large economy, after China.

The proposed mine is in an environmentally and socially fragile area, home to the tribal Kondh people. The Niyamgiri mountain, threatened by the project, is a part of their belief system.

A number of activists have beaten a path to rural Orissa. One of the latest is Bianca Jagger, the former wife of British popstar Mick Jagger, in the name of her own human rights foundation. In her report, Undermining Happiness for the People of Orissa, Ms Jagger says that some of the increasing publicity surrounding the stand off between companies and the state, and rebels reminds her of what she witnessed in Nicaragua, El Salvador and Guatamala, central American countries blighted by civil war.

The comparison is not flattering.

Ms Jagger is not the first to point out concerns. Earlier this year, the Joseph Rowntree Charitable Trust and the Church of England, after conducting thorough research, disinvested in Vedanta. Norway’s pension fund exited two years earlier over human rights concerns. The FT reported earlier this year:

Vedanta responded to concerns expressed by the Church of England by saying that it remained “fully committed to pursuing its investments in a responsible manner” with respect for the environment and human rights.

Investors voting with their feet and rising violence in central India are hurting. India’s central government has begun to realise that widespread unchecked mining development is seriously harming vulnerable communities, and posing a big internal security threat.

In recent days, Jairam Ramesh, the environment minister, has warned that parts of India must be “no-go” areas for mining in spite of their mineral wealth. The secretary of the mining ministry Santha Sheela Nair likewise has told mining companies they face a major perception problem in India. She described a culture clash between miners and rural communities as “extremely violent”.

When Vedanta-listed in London six years ago one of its directors, South African Brian Gilbertson, described it as “ground floor entry into India’s economic boom”. Its bauxite mine in Orissa looks like “a ground floor entry” into an explosive debate about poor regulation, human neglect in India and Maoist rebellion. That sort of opportunity may not be worth the candle.