Indian Activists' Rising Clout

Indian Activists' Rising Clout

U.K. Company's Plan For Mine Is Threatened By Environmentalist Ire

By JACKIE RANGE, Wall Street Journal

16th August 2007

NEW DELHI -- India's Supreme Court is poised to decide whether a British company has the right to mine in a sacred tribal forest, a case that underlines the complexity of undertaking large-scale industrial projects here.

The case's hearing by the court reflects the growing clout of activist groups in India and the bigger role the judiciary is taking in enforcing the country's environmental rules. Experts say legal challenges could become a greater hurdle for foreign and local investors as India's environmental lobbyists work together and gather influence.

Vedanta Alumina Ltd., majority-owned by London-listed metals-and-mining company Vedanta Resources PLC, wants the right to mine bauxite in the Niyamgiri hills, in the mineral-rich eastern Indian state of Orissa. Bauxite is refined to produce alumina, which is then smelted to produce aluminum. Vedanta already operates an alumina refinery it built adjacent to the area it wants to mine, part of an $800 million project that also includes a power plant. The company opened the refinery in March, using bauxite from elsewhere.

The environmental and social activists who brought the dispute to the high court allege Vedanta didn't disclose that forest land was needed for the project and therefore didn't get prior clearance from the Ministry of Environment and Forests -- a violation of Indian law. A spokesman for Vedanta Resources denies this but declined to comment further on the case because it is before the court.

The activists also argue the project will do serious harm to the flora and fauna of the area, which includes rare orchids, elephants, barking deer and sloth bears. Vedanta declined to comment.

At a hearing in May, Vedanta argued that bringing mining to the area would create jobs, said a person who attended. The company also promised to forest other areas in compensation for the trees lost.

The court is scheduled to hear the Vedanta case tomorrow. Its ruling could stop the mine project, require Vedanta to find another area to mine or allow the project to proceed, legal observers say.

The legal battle comes against a backdrop of growing social discontent as India's economic growth of more than 9% leaves many behind. "India's much-fêted economic miracle is not only bypassing many of the most vulnerable communities such as dalits [low-caste Hindus], urban poor and indigenous groups, but is pushing them off their land, out of their homes and destroying their livelihoods," says Bratindi Jena, of the international nongovernmental organization ActionAid, which opposes the mine.

As a result, foreign companies flocking here to tap into the booming economy, as well as India's own fast-growing corporate giants, face increasing grass-roots resistance: Across the country, conflicts have erupted over projects ranging from mines to supermarkets.

In May, villagers opposed to South Korean company Posco's construction of a huge steel complex in Orissa seized three employees, assaulted two and held them briefly. Canada's Alcan Inc. said in April it would withdraw from a mining-and-refinery venture that had faced years of protests, though a spokeswoman denies that is the reason it pulled out. Reliance Retail Ltd., a subsidiary of India's biggest company, Reliance Industries Ltd., which is investing more than $5 billion in a national supermarket chain, has had stores attacked, as small traders fear for their livelihoods in the face of major retail competition.

Amid such opposition, "investors need to be aware of the potential for litigators to file public-interest litigation in the courts," says Seema Desai, a London-based India analyst with consultancy Eurasia Group.

Projects have seen opposition from a range of sources, from farmers to social activists to larger nongovernmental organizations. Ms. Desai predicts that "over time, some of the protesters or litigators will join hands in more organized ways, in which case it could become a big hurdle for investors."

Public-interest litigation, similar to class-action lawsuits in the U.S., is filed directly to India's Supreme Court because it is considered to be in the general public interest.

In court, environmentalists are already getting a sympathetic ear, says Gurdip Singh, a professor specializing in international and environmental law at the University of Delhi. Judicial activism has led to India adopting stringent environmental regulations, he says. The judiciary tends to see the environment as the property of future generations to be protected, and it treats the right to a healthy environment as a fundamental human right, Mr. Singh says.

The Supreme Court is "taking a big interest in things like urban planning, land issues, environmental issues," says Ms. Desai.

In taking on such cases, the Supreme Court is filling a gap left by the central government, which has been reluctant to strictly enforce environmental laws, says Anand Prasad, a New Delhi-based partner with Indian law firm Trilegal.

The Vedanta case centers on a report produced by an expert panel assembled by the Ministry of Environment and Forests on the direction of the Supreme Court. The report said use of forest land in an ecologically sensitive area like the Niyamgiri hills shouldn't be permitted. It suggested environmental clearance for the refinery should be revoked until an alternative mine site has been identified, and said that if the plans had been properly reviewed at the outset, the project would have likely been abandoned.

The refinery was completed and began operating after the report was issued. Vedanta Resources declined to comment on the report.

Write to Jackie Range at jackie.range@dowjones.com