MAC: Mines and Communities

India Update

Published by MAC on 2006-06-10

India Update

10th June 2006

Orissa's main opposition party, Congress, has urged the cancellation of all existing state mining leases, with future leases granted only to the state's mining corporation. It's also offered its backing to people likely to be rendered landless if the huge Posco steel plant goes head. Enthusiasm over these annoucements should, however, be tempered by knowledge that, under former chief minister, JB Patnaik, the Orissa Congress party bulldozed through some highly damaging mining projects, including the notorious Utkal alumininum joint venture (between Alcan and Hindalco).

The Congress-led central government is doing bulldozing of its own, as it maps out amendments to the 49-year old mining act, aimed at speeding up promised new investments in iron/steel, like Posco's.

Meanwhile, as the current Orissa chief minister laments increased desertification in western Orissa, well-known environmentalist, Biswajit Mohanty, warns that mining is only contributing to it. If all the planned steel plants materialised, Mohanty warns that "the water supply from the Mahanadi, Brahmani and Baitarani rivers would have to go up".

Add to this global greenhouse gas emissions from future coal burning and, according to Mr Mohanty, "GHG emission from Orissa is estimated to jump to seven to ten per cent of global levels by 2010."

An article from the latest issue of "Ethical Corporation" touts Tata's record for corporate social responsiblity. Although it deals a mild rebuke to the company for its failure to "defend" itself against accusations surrounding this January's Kalinganagar masscre and a recent report criticising conditions at the company's tea plantations, it completely ignores Tata's extremely aggressive recent moves on indigenous lands and people.

Cancel leases: Cong to govt

Statesman News Service, BHUBANESWAR

8th June 2006

The state Congress has asked the government not to provide mining lease to any company or individual and vest all such areas to the state~run Orissa Mining Corporation ( OMC). It suggested that existing mining leases be cancelled. The resolution was adopted by the OPCC yesterday. It said mineral based companies which would put up their plants in the state can purchase their ore requirement from OMC at market rate.

The Congress apparently wants to clear itself from the charge that it had been instrumental in providing valuable mineral wealth to individuals and private companies. Apart from that the stand would put the BJD-BJP government in a spot. The Congress has been accusing the Naveen Patnaik government of squandering away mineral wealth of the state by indulging in a "mindless" industrialisation spree which includes signing of at least 40 MoUs for steel plants.

Having levelled allegations of kickbacks by luring industrialists with a captive mines clause, the Congress leaders felt it was time to back this charge up with a declaration that all mines should be handed over to OMC and private companies can purchase ore at market rate.
Sources said former law minister Mr Narasingha Mishra mooted the proposal. He was backed by several Congress leaders putting even the AICC general secretary Mr V Narayanswamy in a spot of bother given the policy of the Central government. The point that the Central act needs to be amended if the demand for cancellation of existing lease had to be carried out was also discussed. For cancellation amendments by the Centre is needed while for issuance or recommendation of mining lease it is entirely within the purview of the state government.

In fact the demand to give mining areas to OMC and ask all industries to buy ore at market rate is expected to click with the general public who somehow suspect that industries are coming to the state to exploit the mineral wealth by taking captive mines and paying a pittance in terms of royalty. The ruling BJD-BJP combine cannot wriggle out of the fact that the market rate of ore is much higher than the royalty that it gets by providing captive mines to industries.

Another significant resolution taken by the OPCC here was about the OBC quota. While welcoming the 27 per cent reservation, the Congress leaders here wanted the government to act with caution and care rather than rushing into such sensitive issues. The nation wide agitation and repercussion should be borne in mind stated several Congress leaders much to a few so-called OBC champions in the party. In a state where caste based politics is negligible, a few OBC leaders who want to corner posts, are trying to misguide the party, said a Congress activist. The implicit reference was the likes of OPCC president Mr Jayadev Jena and a handful of others who allegedly try to play up the caste card and impress on central leaders who think cow belt equations are applicable throughout the nation.

Congress to people: Oppose Posco plant

Statesman News Service, PARADIP

9th June 2006

The Congress has pledged its support to the people’s movement against displacement caused by the proposed Posco steel plant. At an impressive rally held here yesterday, Congress leaders exhorted villagers to emulate the Baliapal peoples movement that had been successful in getting the National Test Range proposal scrapped. Referring to the check gates erected by villagers prohibiting the entry of officials and POSCO representatives,

Congress leaders said that even an economic blockade by the government had failed to break the Baliapal movement.

Significantly, several senior Congress leaders, including former chief minister Mr JB Patnaik, AICC secretary Mr Ananta Kumar and others participated in the meeting. Another important aspect of the gathering was the presence of several ruling Biju Janata Dal members who are known to be supporters of former minister Mr Damodar Rout. The Congress leaders pointed out that they were not opposed to industrialisation in the state. Big industries are coming up even in Congress-ruled states, they noted.

They also pointed out that lopsided MoUs favouring the company at the cost of the state had not been signed elsewhere.

The people of the three panchayats, Dhinkia, Nuagaon and Gadakujang, who will face displacement are prosperous because of their agricultural activities, they said.

Mr Anata Kumar clarified that the Congress was not against POSCO. He said that his party was against the manner of displacement of the people and the inadequate rehabilitation measures.

The leader of the Opposition, Mr JB Patnaik wondered why the state had failed to reply to questions raised on the controversial MoU. The state government has bungled the entire project, he charged. He warned that no project can be set up by force against the people’s wishes.

Mr Patnaik urged the villagers to erect check gates and to bar the entry of ruling party members, government officials and POSCO staff.

He claimed that POSCO will use the hot rolling method at the plant and that it will send products to South Korea for its own benefit. The company will also dispatch iron ore to its plant in Korea, he stated.

Congress leaders said locals who are progressive and prosperous will become beggars and landless labourers, once they are displaced from the agricultural fields.

Former MP Mr Ranjib Biswal said that the agricultural belt of this district will be destroyed by pollution after the establishment of this project. People should not be asked to give up agricultural land for a factory, he remarked.

Tirtol MLA Mr Chiranjeeb Biswal declared that Congress will fight for the interest of the displaced families of the three panchayats. Others including Mr Umesh Swain and Mr Rabi Mallik (both MLAs) delivered fiery speeches criticising the policy of the government.

India tackles the licence Raj

Australian Financial Review/Bloomberg
Debarati Roy

7th June 2006

India plans to overhaul its 49-year-old mining law to cut permit delays, boost output and bolster economic growth in changes that may benefit investors such as South Korea's steelmaking giant, Posco.

An official panel will advise the government within two months of amendments to the Mines and Minerals Act of 1957, says Mano Ranjan, secretary to the Department of Steel. The present logjam has prevented the Steel Authority of India, the nation's largest steelmaker, from gaining a new mining licence for 15 years.

The drive is aimed at spurring investment in mining in India, which, according to McKinsey & Co, holds the world's fourth-largest reserves of bauxite and the fifth-largest of iron ore.

The legal revamp comes as India's government is opening up the economy and attempting to simplify the maze of bureaucracy known as the "licence Raj".

Easing the rules may lead to a 10-fold increase in India's iron-ore reserves, which stand at 23 billion tonnes, Ranjan says.

"Getting approvals in India seems a very difficult thing," says Jeong Tae-Hyun, deputy managing director of Posco India. Posco is the world's fourth-largest steelmaker. "We were supposed to get the initial licence to prospect ore two months back but it seems it will take much longer."

The panel is headed by Anwarul Hoda, a member of India's Planning Commission, and includes ministry representatives and officials from states holding mineral deposits. The group will seek to reduce the time it takes to issue licences, says Ranjan, who is the most senior official in the ministry.

The committee's recommendations will be effective after a revised law is approved by parliament.

The Steel Minister, Ram Vilas Paswan, said last month the government was "very keen" on the reform provided iron ore supplies for domestic users remains adequate.

"We are eagerly waiting for the Hoda committee recommendations," says P.K. Mukherjee, managing director of Sesa Goa, India's biggest exporter of iron ore, in which Japan's Mitsui & Co owns 51per cent."Companies spend a lot of time and energy running around from one government department to the other seeking approvals, which can go on for several years."

Under the act, a company has to ask the government of the state holding the reserves to recommend its proposal to the federal departments of environment and forests, according to P.K. Mishra, deputy secretary of the Federation of Indian Mineral Industries, a trade body.

The investor must then get a land-clearance permit from the state government, which is granted after the company has devised a plan to replant in another area the trees and crops that are lost due to mining.

Clearances need to follow from the state for pollution of noise, air and water. If the site is inhabited, a rehabilitation plan needs to be worked out. An application which has cleared all these stages may then be recommended by the state to the federal government, which issues the licence.

"We have been waiting for 15years to get environmental clearance to develop a mine in Chattisgarh state," says Mukund Trivedy, a spokesman for the Steel Authority in New Delhi.

Chattisgarh in eastern India holds 13per cent of the nation's reserves of iron ore and 16per cent of its coal, according to McKinsey.

"A few investors are reluctant to invest in India as it may take several years to resolve bureaucratic issues, get clearance and all the necessary paperwork before you can start work on the plant," says Alfred Wong, who helps manage $US12billion ($16 billion) of funds at Singapore-based UOB Asset Management.

Global prices of iron ore have soared because of a surge in steel demand in China, the world's biggest consumer of the metal, where the economy grew 10per cent last year.

Long-term iron-ore prices climbed 19per cent this year after rising a record 71per cent last year.

India will need to produce 71per cent more ore by 2020, according to the National Mineral Development Corporation.

CM addresses aridity fears

Statesman News Service, BHUBANESWAR

5th June 2006

Chief minister Mr Naveen Patnaik allayed fears of desertification taking place in certain perennially drought-prone areas of Bolangir and western Orissa districts.

Addressing a World Environment Day function here today Mr Patnaik quoted experts who had recently held a workshop for eastern Indian states on the subject. The consensus at the workshop was that Orissa is free from the threat of desertification in the near future, he said.

Dwelling on the theme for this year as declared by the UN, Mr Patnaik said desert and desertification of dry lands was to be addressed in right earnest as desertification increases poverty.

It is estimated that 40 per cent of the earth is dry land and with the immense pressure on land. Sustainable land management is the need of the hour and proper utilisation will avert desertification of such dry land.

He referred to the drought-prone area programmes and afforestation as well as livelihood schemes undertaken by the state government in the Koraput-Bolangir-Kalahandi region which is vulnerable to drought.

It is easier to prevent desertification than to reverse it, he stated, while harping on crop and land management, irrigation and livelihood schemes. Mr Patnaik touched upon the plantation schemes citing the instances of Titlagarh which is the hot spot of the state where temperatures rise to 50 degree Celsuis during summer. Plantation has been taken up over 150 hectares in Titlagarh he said.

The chief minister lauded the efforts of eco clubs and said 100 more clubs in each district will be formed. He also touched upon the successful restoration and conservation of the states major water bodies, particularly the Chilka lake.

Later Mr Patnaik gave away the Prakruti Mitra Awards.

Forest cover declines

The state's environmental health is threatened due to rapid loss of forests, growth of unregulated polluting industries and rampant mining. "There is a rapid decline in the state's forest cover since we lost 472 square kilometres of forest in two years as per the Forest Survey of India Report. We have also lost more than 12 square kilometres of mangroves," said Mr Biswajit Mohanty who is associated with several wildlife and environment protection organisations.

Lack of enforcement by the authorities concerned and the boom in iron ore trade have resulted in as many as 64 sponge iron units coming up in Keonjhar and Sundargarh threatening the water sources and agriculture field.

More than 1,200 stone crushers operate in the state and many of them violate pollution control rules, he contended.

Mining activity has increased several fold and all this has resulted in severe degradation of the state's environment which has a limited "carrying capacity" to assimilate the mining and industrial effluents in such a short time.

Analysing the future pressures on the environment, he observed that if all the MoUs for steel plants materialised, the state would have a production of more than 40 MT for which the water supply from the Mahanadi, Brahmani and Baitarani rivers would have to go up.

The state also aims at producing power using coal. State's industries and power stations presently emit about 164 MT of carbon dioxide (equivalent to total quantity emitted by India in 1996) which is about three per cent of the global emission of GHGs. After new metal and power units are commissioned, GHG emission from Orissa is estimated to jump to seven to ten per cent of global levels by 2010.

All this calls for a total comprehensive environmental impact assessment, to examine the combined effect of all the proposed projects in mining, metals and power production on the state's environment and livelihoods of local communities. Strangely, this has not been taken up as yet, he remarked.

CPM twin stands on Tatas

The Telegraph (Calcutta)

4th June 2006

As the Left Front government in Bengal tries to win over farmers in its bid to acquire land for Tata Motors’ small-car unit in Hooghly district, CPM workers in Chhattisgarh’s Bastar region have joined hands with villagers in their opposition to Tata Steel’s proposed mega plant.

The villagers have been protesting against the 5-million-tonne greenfield Project — proposed to come up at Lohaniguda near Jagdalpur — around 300 km from the state capital, as it would lead to loss of land.

Although some regional leaders of the BJP are believed to have extended support to the villagers in their movement, they did not do so openly as it would have led to embarrassment for the government. As a result, the villagers continued their protest with little external help.

With the Marxists deciding to join the battle, the issue looks set to take a new turn.

Exactly a year after the company inked a memorandum of understanding with the Raman Singh government to set up the Rs 10,000-crore plant, the land for the mega project is yet to be finalised.

A senior administrative official involved in the land allotment process conceded that the journey ahead is unlikely to be smooth for the company and the government as a major political party like the CPM has thrown its weight behind the people’s movement.

The CPM’s stand seems to have taken the steel major by “surprise”.

A senior official who was recently in town said while the communists in Bengal were extending all support to the Tata small-car project, their counterparts in Chhattisgarh were following a “different” line. This is something hard to understand, he added.

The CPM, on the other hand, sees no contradiction in its stand on industrialisation in the two states.

Party state secretariat member Dharamraj Mahapatra told The Telegraph: “The situation in Bengal is totally different from the one in Chhattisgarh. In Bengal, Tata’s project will be implemented with the consent of the people. But in Chhattisgarh, the villagers will not be taken into confidence.”

Mahapatra tried to allay fears, saying the party was not opposed to industrialisation. “All that we demand is proper rehabilitation for Bastar’s tribals, who stand to lose their land,” he added.

Corporate responsibility in India: Flying the flag the Tata way

Poulomi Mrinal Saha, Assistant Editor, Ethical Corporation

6th June 2006

Those searching for national champions of corporate responsibility in Asia need look no further than the 138-year-old behemoth Tata Group.

An Indian marketing consultant has been recently honoured with a patent for his eco-friendly packaging for steel.

Himanshu Sheth has developed Coir Atlas, a product that aims to replace timber packaging with a mix of bamboo and jute.

He was encouraged to create this biodegradable alternative not by an engineering or design academy, but by a company - Tata Steel.

Innovating while protecting the environment is one of the commitments the Tata Group, one of India's biggest business conglomerates of which Tata Steel is a subsidiary, has made towards what it calls "nation-building", which it sees as part of its responsibility towards wider society.

The group, which has 93 companies in seven sectors including chemicals, energy, consumer products and technology, is one of India's oldest businesses and has a well-established tradition of giving back to society.

The Tata Group does this through trusts, such as the Tata Institute for Fundamental Research, the Tata Institute for Social Sciences and the Tata Memorial Hospital.

These philanthropic trusts, endowed by the Tata family, are 65.9% shareholders in Tata Sons, the holding company for the group.

With a philanthropic culture that dates back to the mid-19th century, the Tata Group has long been involved in community initiatives across India, and has tried to adhere to consistent principles and values across all its operations.

In 1998, the group decided to formalise these value systems and the Tata Code of Conduct was formed.

The code is composed of 25 clauses of expected corporate and employee behaviour. These include "corporate citizenship", which demands an active involvement in communities with an aim to making them self-reliant; "political non-alignment", which prohibits companies either directly or indirectly supporting or funding any political party, candidate or campaign; "ethical conduct", which imposes a broad duty on directors, management and employees; and "conflicts of interest", which prevents management from engaging in any transaction that can personally benefit themselves or their families.

Implementation of the Tata code of conduct at company level is ensured by the Ethics Office, headed by an ethics counsellor.

Going local

Among the many annual events and activities the Ethics Office organises is "ethics month" at Tata Steel, designed to generate "awareness, sensitisation and reinforcement" of the behaviour expected of employees and suppliers.

Training and induction programmes are held for new employees and they are expected to sign an allegiance to the Tata code of conduct when accepting a job.

Suppliers, too, are expected to sign a memorandum of understanding, violation of which could result in blacklisting.

The ethics counsellor, who is independent of any department within the company, is the first port of call for employees who wish to blow the whistle on violations of the code.

But if they wish to report to a higher authority, they can seek the attention of the company's managing director or chief executive, who also carries the title of chief ethics officer at Tata companies.

Rekha Seal, ethics counsellor at Tata Steel, says the recently enhanced whistle-blower protection policy has seen many employees come forward to report apparent violations of the company's ethical code, although only four of five of these a year turn out to be major complaints worth investigating.

In fact, the harsh penalties ranging from demotion to sacking has seen a significant decrease in employee unethical conduct at the steel plant.

The company is currently deliberating on how it can factor in ethical behaviour in the performance management system of executives and develop a toolkit to assess prospective employees on their value-orientation at the time of recruitment.

The bigger picture

While ethics counsellors and their teams concentrate on the implementation of the Tata code at ground level, there are corporate social responsibility chiefs who spend their time liasing with the heads of environment, health and safety, human resources, business excellence and other departments devising responsibility programmes and seeking resources to fund them.

The Tata Centre for Community Initiatives helps develop a collective approach for Tata companies on corporate responsibility.

The formation of the TCCI was an attempt to institutionalise the Tata Group's long-established tradition of community development and welfare, and it has recently been extended to include environmental management in recent times.

Anant Nadkarni, vice-president for group corporate social responsibility at TCCI, believes it is Tata's workforce that can make or break its reputation for corporate responsibility.

"We need to make a group-level coherent statement [about our values] and I need the integrity of our people for it," he says.

Nadkarni says 11,000 of the 215,000 Tata employees are registered volunteers and are involved in unpaid community work, for example in health and education, during their weekends.

The TCCI has helped group companies agree a "minimum level of action" for its volunteering work and requires the bigger subsidiaries to submit reports on their volunteering work that should include details of exemplary projects and senior management involvement.

The companies, in their report-making, are helped by the Tata Index for Sustainable Human Development, which TCCI developed with the help of the UN Development Programme in 1997, since when it has been revised three times.

"The guidelines help build a sense of higher purpose into an activity and aim to put people above everything else," says Nadkarni.

All major Tata companies produce Global Reporting Initiative and Global Compact reports every year, and this year, 20 have so far agreed to comply with the SA8000 standard.

Corporate governance

Corporate responsibility experts in India believe the governance structure at Tata group to be extremely good, owing much to the philanthropic nature of the companies' ownership and high-level disclosure about group activities.

The stake the trusts own in the holding company demonstrates the group's commitment to uplift society not through what it calls "patchwork philanthropy" but by supporting individuals, causes and institutions that have the potential to improve the overall quality of life in India.

The trusts symbolise one of the Tata group's core beliefs: "What comes from the people goes back to the people many times over."

Last year, the Tata trusts won the corporate citizen of the year award at the Economic Times Awards for Corporate Excellence.

Chink in the armour?

But as with any large organisation, it is not all roses at the Tata group.

Sachin Joshi, senior researcher at the Centre for Social Markets, says the Tata group has failed to clarify its position when group companies' names emerged in recent scandals.

A recent example is the killing of 12 tribals or "adivasis" in Orissa's Kalinganagar district by police on 3 January.

The adivasis were protesting against their land being taken by the government for the construction of a Tata Steel plant.

The villagers alleged that the government had bought the land from them at a measly price and sold it on to the private sector for a much higher price.

When questioned by Ethical Corporation, Tata denied any wrongdoing in what transpired at Kalinganagar, but the company has not issued a public statement on the affair. Joshi believes this to be a mistake.

A silence has also descended over an ActionAid report last year that alleged companies including Tata Tea, makers of Tetley, of inhumane working conditions and low wages on their tea plantations in India.

Indian civil society and the media have been criticised for not being more questioning of big business. Their reluctance is blamed on a traditional sense of awe and respect towards large companies.

Some put this down to the role large firms are seen to have played in India's economic growth.

"Wealth in Asia brings power. It is idealised here in a way it isn't in European markets," says Chandran Nair, founder and chief executive of Global Institute for Tomorrow, a Hong Kong-based think tank.

Nair also believes that Asian civil society has to move away from its traditional confrontational approach to that of engagement in order to see results.

He says that the corporate social responsibility movement in Asia "is barking up the wrong tree" and needs to divert attention from small details to the bigger picture.

Those bigger issues are increasingly faced by groups like Tata as they expand into other nations. The conglomerate has a presence in 40 countries at present.

As Tata increasingly goes global it will need to raise the bar of responsibility and accountability.

Recognising cultural sensitivities and local operating conditions while retaining core values and communicating them to new employees in new markets amounts to a tough challenge.

Tata, with an enviable record for good conduct, says it realises the pressure and growing expectations and will continue to apply the "highest of ethical values" to its operations the world over, going beyond the minimum required by law in any host country.

In India, the group hopes to further the debate by indirect government lobbying. It cites its investment in projects such as the Tata Energy Research Institute, India's first research organisation on sustainability.

The group also leads collaborations with international organisations such as the UN and, at home, the Confederation of Indian Industry, in shaping Indian business's response to the global corporate responsibility debate. A values-driven heritage should stand it in good stead as it embarks on this monumental task.

Quick facts:

93 companies
32 publicly listed companies
Operations in seven business sectors
$17.8 billion turnover (2004-05)
Turnover 2.8% of India's GDP
215,000 employees
Operations in 40 countries across six continents
Exports to 140 nations

Sectoral contribution to Tata's financial make-up:

Communications and information systems - 27%
Engineering - 24%
Materials - 19%
Energy - 9%
Consumer products - 8%
Services - 8%
Chemicals - 5%

Useful links:

Diamonds to add shine to Chhattisgarh's economy

6th June 2006

Shimla, Jun 5: Chattisgarh government has roped in several big private players in diamond industry to tap the huge deposits of the precious stone in the state.

Talking to newspersons here today, the state Chief Minister Raman Singh said that companies like like De Beers, Rio Tinto, BHPBilliton, Geo Mysore and Jindals have been granted prospective licences for exploring diamonds in kimberlite zones.

"Chhattisgarh would be converted from 'rice bowl' to 'diamond bowl' of India in the next five years and the state would emerge as one of the most prosperous state in the country by 2015," he said.

Bhilai plant earns Rs.27.81 billion profit, Raipur: Bhilai Steel Plant (BSP), India's largest public sector steel unit, has posted Rs.27.81 billion in net profit and a total turnover of Rs.112 billion in fiscal 2005-06.

"BSP, a unit of the state-owned Steel Authority of India Ltd (SAIL), earned Rs.27.8 billion net profit in 2005-06, despite fluctuating supplies of imported hard coking coal, sharp rise in input prices mainly in imported coal, steep hike in demurrage rates and sharp reduction in free time of wagons for loading," an official statement said Sunday.

The plant, located 30 km west of Chhattisgarh's capital Raipur, was also worst hit by "spiralling coal prices in 2005-06 because of higher percentage of imported coal in its blend", the release stated.

The plant has produced 5.178 million tonnes hot metal, 5.05 million tonnes of crude steel and 4.29 million tonnes of saleable steel in the last fiscal.

For the first time since its inception in 1959, the plant has crossed 5 MT production mark in hot metal as well as crude steel, becoming the country's only steel unit in both the public and private sector to achieve this feat.

Meanwhile, the state has urged New Delhi to allot the entire Rowghat iron ore mines to BSP.

The Rowghat mines, based in the state's Bastar district, are considered the future lifeline for BSP as the plant is running short of iron ore. Its current source - the Dalli Rajhara iron ire mines - 98 km from the plant, has stocks left hardly for five years.

SAIL claims that Rowghat has the world's best iron ore reserves that can feed the plant for at least 75 years. Rowghat is known to have iron ore deposits of over 550 MT.

"BSP is on top priority of the Chhattisgarh government. The state has recommended the Indian government last month to allot the entire Rowghat iron ore deposits to Bhilai Plant," Chief Minister Raman Singh said Saturday.

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