New Delhi: The environment ministry asked two high-profile projects why it should not close them over possible violations of green rules, continuing an assertive break with tradition that has hit several multi-billion-dollar investments.
Lavasa, a unit of Hindustan Construction Co which plans a $44 million initial share sale, has been asked to provide reasons why the government should not raze all construction after 2006 in a Rs1.4 trillion ($31 billion) project to build a town outside Pune.
Jindal Steel and Power has been asked to defend the ministry’s clearance given to it for a 6 million tonne per year plant in Orissa.
The ministry, in letters to the firms, gave Lavasa until 10 December to file its response. Jindal must answer by 7 December.
Failure to satisfy the ministry could lead to the cancellation of both projects.
The ministry has already scrapped plans by miner Vedanta to mine bauxite and to expand a $9.5 billion alumina refinery project in Orissa.
Currently also under its scanner is a $12 billion mill proposed in Orissa by South Korean steelmaker Posco , the largest single foreign investment into India.
Union environment minister Jairam Ramesh is increasingly becoming more proactive in checking whether projects across India are following regulations.
Previously, it was criticised for merely rubber-stamping investment decisions.
On Friday, the auditors slammed the ministry for failing to meet several green targets for 2008-09, including on afforestation, pollution control and wildlife sanctuary exploration. That was before Ramesh became minister.
While much of the ministry’s actions are led by a realization in India that enforcing environmental rules does not have to hurt growth and can make government policies transparent, critics have called Ramesh a “Dr No” of development.
“It’s adding to an existing business environment that is already difficult for companies in India, ” said Kevin Grice, senior international economist at London’s Capital Economics.
“But will it affect direct foreign investments? I suspect not. The scale of the market is such that the level of interest will remain high. Investors have come to expect these issues.”
India ranked 134 amongst 183 nations surveyed by the World Bank for ease of doing business, coming behind other South Asian nations like Pakistan, Bangladesh and Sri Lanka.
Several corruption scandals are currently dogging the government, with the latest around alleged bribes for loans involving companies in the booming infrastructure sector.
Both HCC and Jindal said they had not yet received the notices and would respond only after they had studied them. Sushil Maroo, a director at Jindal, told the news agency the plant did not violate any norms and he did not expect any delay to the project.
Shares in Jindal hit a low of Rs572.70 and closed down 2.2% at Rs613.85 while those in HCC performed the worst in at least two years to close down 19% at Rs40.10. The benchmark Mumbai index was 0.94% lower.