Lafarge mining project throws up knotty issues

Lafarge mining project throws up knotty issues
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First Published: Wed, Mar 31 2010. 09 33 PM IST

Updated: Wed, Mar 31 2010. 09 33 PM IST
The next corporate cause célèbre in India could well be Lafarge SA. On-again off-again reports as to its limestone mining project in the East Khasi Hills region of Meghalaya, which feeds a cement factory in adjacent Bangladesh, mask the potential for public relations damage to this France-based cement maker. Equally, it throws up knotty issues that bind business, diplomacy, land rights, and implicit paternalism—the lifeblood of politics and business.
Pitched as a model of transnational benefit, Lafarge Surma Cement Ltd (LSC) of Bangladesh would, through its subsidiary Lafarge Umiam Mining Pvt. Ltd (LUMPL), source limestone and shale. A 17km cross-border conveyer system was built for the purpose. The Indian subsidiary started to ship raw material in 2005, and cement production at its Bangladesh parent began in late 2006. Problems arose the following year when the mining concession was reclassified as forest land. Allegations surfaced as to how land was earlier misclassified, a plaint to India’s Supreme Court put it, as “wasteland and non-forest area consisting mainly of barren land, and rocks”.
The reclassification of land stalled mining operations for some months in 2007—later overturned with lobbying and judicial imprimatur. It was stalled again in February by the Supreme Court, when it directed Lafarge to stop mining till 19 March, the date of the next hearing. That stands postponed.
An additional stink, according to the group that has taken the company to court, Shella Action Committee (SAC)— named after a village in the mining zone—is that Lafarge offered as mortgage tribal land in Meghalaya it was operating on lease, and claimed consent from the Reserve Bank of India to secure a loan of $157 million (around Rs708 crore) from a consortium to finance the factory in Bangladesh. Alongside, SAC members have widely circulated updates among activists and media that quarrying continues despite the court ban.
For its part, Lafarge claims there is “nothing new in the allegations”, according to a company statement from early February. While there may be nothing new in the allegations, these nevertheless remain—and interest the Supreme Court. Lafarge dismisses the concern that tribal land has been mortgaged in violation of India’s Constitution by asserting that “…in the event of non-payment of the loan and for recovery of the same under no circumstances the land will be transferred to a person other than a permanent tribal local resident of the State. Therefore, there is no question of the land holding laws of Meghalaya in relation to the tribals or locals being violated at any point”. On SAC, the company says its “activities are limited to creating disturbances on the smooth operations of LUMPL”, and that it is an “unconnected breakaway group” of Shella village authorities.
Lafarge is also rallying the influence of the state government of Meghalaya and the area’s explosive political equation, the governments of Bangladesh and India, and that of Lafarge’s lenders for its Bangladesh factory: a consortium that includes International Finance Corp. (IFC), Asian Development Bank, European Investment Bank, and DEG—Deutsche Investitions-und Entwicklungsgesellschaft mbH. The lenders wrote in March to senior Indian officials, including the environment and forest minister Jairam Ramesh, secretary at the ministry Vijai Sharma, finance secretary Ashok Chawla, attorney general G.E. Vahanvati, and others close to the United Progressive Alliance leadership, urging that the “government of India continue to extend its full support to enable this project to continue and to assist LSC, on an urgent basis, in obtaining the final forest clearance permit, to the extent required”.
While this could prove to be compelling firepower—irrespective of the Supreme Court’s eventual order favouring Lafarge or not—Lafarge may have already erred by downplaying the bite of retrospective and ongoing responsibility, and the power of activism. Through “viral” networking, activist groups can pressure businesses to be accountable to a universe greater than their shareholders and beneficiaries in the political economy space.
Momentum is gathering among the region’s activists to take the battle afresh to Lafarge. Teaming with their colleagues in India and overseas, they are preparing to take on Lafarge in various forums. During my recent conversations with some, I discovered their reluctance to take the case, for instance, to the Compliance Advisor Ombudsman (CAO), IFC’s “independent recourse mechanism” and that of the Multilateral Investment Guarantee Agency. Many activists perceive the CAO as biased towards its clients, not communities at the business end of policies and practice.
Sudeep Chakravarti writes on issues related to conflict in South Asia. He is the author of Red Sun: Travels in Naxalite Country. He writes a column alternate Thursdays on conflicts that directly affect business.
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First Published: Wed, Mar 31 2010. 09 33 PM IST