London Calling - August 27 2004

London Calling! August 27 2004

The Madness of King Patnaik

Several major iron and steel and bauxite-alumina projects have recently been slated for the Indian state of Orissa. Only last week, BHPBilliton and South Korea's Posco announced a huge new steel plant in the state, vying with a proposal made by the Indian company, Tata.

Then on Tuesday Vedanta - the most disreputable band of mining renegades we've seen for some years (well since Robert Friedland got mob-handed in the 1990s) - got in on the act. The London-based front company for Sterlite Industries said that it, too, will construct a steel plant, along with a port and iron ore mine, all expected to cost a cool four and a half billion dollars.

Speculation is fast growing (at least we'd like to think so) that BPHBilliton and Vedanta are engaged in some sort of "boys own" rugby match, with the winner earning the kudos of the House and a pat on the back from the head master (the House being Orissa's state assembly and the headmaster the self-aggrandising Chief Minister Naveen Patnaik).

Late last year Vedanta promised to dump a major alumina refinery and bauxite mine on Orissa's Kalahandi district (see article below: "A struggle to save Nyamgiri hills"). Lo and behold!! - BHPBilliton was soon threatening similar disaster - and in the same district too. Personal rivalries surely come in to play here. Brian Gilbertson led Vedanta to the Londom market in December 2003 not long after he'd been unceremoniously booted out of BHPBilliton (he's now heading SUAL, Russia's second biggest aluminium company). It's not hard to picture Chip Goodyear, Gilbertson's replacement at BHPBilliton, gleefully rubbing his hands in anticipation of the bumper-to-bumper duel his company 's now about to fight against Brian's former corporate vehicle on Indian soil.

Goodyear recently declared his intention to use Orissa as a testing ground for his company's "new" corporate responsibility policy, where he clearly think's BPHBilliton is mines ahead of any other company. There's definitely plenty of dirt he could throw against Sterlite/Vedanta for its flagrant denial of adivasi (Indigenous Indian) rights, and its appalling legacy of mismanagement in India. However, some of the mud is likely to stick on BHPBilliton as well. For most of Orissa's bauxite reserves lie on tribal territory and in protected forests - the very areas on which Goodyear swore last year that his company would never trespass.

Vedanta certainly seems the much weaker party. It hasn't even raised the more than one billion dollars required to build its Lanjigarh alumina refinery and mine in Kalahandi - let alone shown it can triple this amount in order to venture into iron and steel. Nor does Vedanta have any experience in the sector, in contrast to BHPBilliton, one of the world's biggest iron and steel producers. Not surprisingly, just after announcing its new venture, Vedanta's shares fell yet again...

So is Vedanta merely posturing? After five years trying to launch a bauxite mine and refinery in Orissa, the much more powerful Utkal consortium (Alcan and Hindalco) is still teetering, having been fiercely rebuffed by local people, battered by international human rights groups, and abandoned by its erstwhile partner Norsko Hydro, after state-sponsored murders of unarmed demonstrators in 2000.

Rio Tinto also thought it was in for a relatively free ride when it linked up with Orissa's biggest iron ore company several years back. But it withdrew in 2002, declaring the quality of ore not high enough and probably also shaken by local suspicion of its intentions and accusations that it would be operating in a forest zone.

However this is Orissa, where normal rules of market competition, precepts of prior informed consent and decisions on constitutional rights affirmed by the Supreme Court of India, are blatantly ignored. Meanwhile the World Bank and Britain's overseas development agency, DFID, uncritically bolster one of the nation's biggest purloiners of the Commons, Naveen Patnaik.

It's India's Wild East - a bargain basement of real estate and mineral wealth. Almost anything goes in the state.

And - judging from recent history - almost everything soon will.

[“London Calling” is published by Nostromo Research, London. The opinions expressed do not necessarily reflect those of any other individual, organisation or editors of the MAC web site. Reproduction is encouraged with full acknowledgment]

Sterlite to set up steel plant in Orissa

Prafulla Das Bhubaneswar, Financial Times

Aug. 25 2004

The Sterlite Group, promoter of the London Stock Exchange-listed Vedanta Resources Plc, has decided to set up a five million-tonne steel plant in Keonjhar district of Orissa at an approximate cost of Rs 12,500 crore. Sterlite Iron and Steel Co Ltd, a company specially promoted for the purpose by the Sterlite Group and the Vedanta Resources Plc, will implement the proposed steel project. The project will generate direct and indirect employment for about 8,000 persons.

The details of the project were discussed at a high-level meeting between the Chairman of the Sterlite Group, Mr Anil Agarwal, and the Chief Minister, Mr Naveen Patnaik, at the State Secretariat here late on Tuesday evening. Senior officials of the company as well as top officials of the State Government attended the meeting.

The memorandum of understanding (MoU) for the steel project is likely to be signed between the State Government and the company within a month, according to company officials.

The company had first submitted the project proposal to the Industrial Promotion and Investment Corporation of Orissa Ltd (IPICOL), which has already referred the case to Orissa Industrial Infrastructure Development Corporation (IDCO) to initiate the land acquisition process. The company has submitted a proposal seeking allotment of approximately 3,500 acres of land for the project.

The steel plant project will be implemented in two phases - two million tonne capacity in the first phase and three million tones in the second. The first phase is likely to be completed by 2007 and the second phase by 2009.

The Chief Minister has agreed to provide necessary support to the greenfield project and directed the Government officials concerned to expedite the framework of mutual co-operation for the project. The Vedanta Group is promoting a 1.4 million-tonne alumina project at Lanjigarh in Kalahandi district of the State at a cost of Rs 3,500 crore.

The project is in an advanced stage of implementation and likely to be commissioned by 2006. The progress of the alumina project was reviewed on the Tuesday's meeting.

Sterlite Group is the third major company to approach the Orissa Government for setting up a steel plant in the State in less than a fortnight. Earlier, the South Korean steel maker Posco and Australian mining major BHP Billiton had jointly the approached the State Government to set up a 10-million-tonne steel project either at Duburi in Jajpur district or Dhamra in Bhadrak district.

The Posco-Billiton combine was followed by Tata Steel for setting up of a six million-tonne steel plant at Duburi with an investment of Rs 8,000 crore. Besides, a few other Indian companies are likely to sign MoUs with the State Government shortly to set up steel plants in the State.

A struggle to save Niyamgiri forests

P. Devarajan The Hindu Businessline

August 8 2004

The undisputed fact is that Niyamgiri forests are being clear felled for India to become one of the world's biggest aluminium producer as other corporates are working on identical projects. AN old Cree Indian saying goes: "Only after the last tree has been cut down/only after the last river has been poisoned/only after the last fish has been caught/only then will you know/that money cannot be eaten." A detailed note on Niyamgiri forests in Orissa (sent by email) styled "Someone's digging in our backyard" by Friends of Niyamgiri ends quoting the lines and one hopes they do not come true. In Orissa's forests a struggle is on between tribals and corporates keen on mining the rich bauxite mines and one heard of it first from friends in Amravati. "Deep in the heart of a verdant Niyamgiri hill range, on the border of Kalahandi and Rayagad districts of Orissa, uprooted Dongria-Kandhas live in plastic hovels wrapped in barbed wire and private guards," says the note. Lanjigarh, in this forest, is the focal point as Sterlite Industries proposes to set up an alumina refinery costing around Rs 4,500 crore. The project involves a bauxite mine high up on the 4,000 ft. north-west range of Niyamgiri mountain, home to a people called Jarene while outsiders dub them Dongria Konds.

The mined bauxite will be brought down to the foot of the hill by a conveyor belt for processing into alumina and going by Mr Kuldip Kaura, Chief Executive Officer, Sterlite Industries (India) Ltd, the work will not damage the forests. "In fact, we plan to adopt the most modern devices to protect the environment," Mr Kaura says.

Lanjigarh is boxed in by forested hills on its north, south and west faces and enjoys a crown density of over 40 per cent, says the Government of India's Forest Survey Report. The survey report admits to dense forest contiguity from around Devagiri in Rayagad district to the Niyamgiri forest (on the border of Rayagada and Kalahandi districts) and further into the forests of Karlapat and Thuamal Rampur in Kalahandi district.

It then turns south connecting the Tikiri-Lilligumma and Gumma forests, and then on to the Narayanpatna forests in Koraput district. Years of brutal chopping of trees and animals have made life miserable for those living in Kalahandi and the fear is the trend could get replicated with the water flow of the Vamsadhara river from Niyamgiri drying up over time.

The Forest (Conservation) Act 1980, Section 2.3 states that applications for environment and forest clearances must be filed with the mining proposal. The Friends of Niyamgiri contend that "no assessment has been carried out to study the impact of mining in these forests on the flora and fauna and no wildlife study has yet been carried out by any leading wildlife organisation or the wildlife wing of the Government. The hill ranges have not yet been fully surveyed for its rich bio-diversity and a rich resource would be lost forever if the mines become operational."

The latest issue of Sanctuary (August 2004) has a page on the disturbing tale of Niyamgiri. But Mr Kaura and Mr Tarun Jain, director - finance, disagree. At their all-glass office at Vile Parle named Vedanta, they say that an Environment Impact Assessment (EIA) study has been done and the Orissa Pollution Control Board, after detailed public hearings, had given the alumina project an okay. They admit that the Orissa Government has passed on the project details to the Ministry of Environment and Forests in New Delhi, for final clearance, which is pending. "But we have been allowed to go ahead with site clearance by New Delhi," they claim and to an extent confirm the details provided by the Friends of Niyamgiri. The company has acquired some 2,000 hectares on lease from the Orissa Government and the officials told Business Line, "that the tribals were co-operating. We have rehabilitated the tribals and we will not take any steps which displeases the public. We are providing the tribals with the best homes and medical facilities."

The undisputed fact is that Niyamgiri forests are being clear felled for India to become one of the world's biggest aluminium producer as other corporates are working on identical projects. Chhattisgarh, Orissa and Maharashtra are linked by some of the finest forests housing rare flora and fauna and whose interiors give birth to major rivers. The forests of Chhattisgarh will shortly be axed by a long line foreign diamond companies while the Orissa Government has announced setting up 13 minor ports to ship out processed raw minerals.

One port, Barunei Muhana is within the Gahirmata Marine Sanctuary, home of the famed Riddley's turtles. Friends of Niyamgiri are on a signature campaign to make New Delhi aware of the mess and Sterlite officials are aware. There may not be many backing Niyamgiri forests and its denizens as the dumb cannot match the televised scream of the Sensex. Forests will form footnotes to India's economic history.