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Business must be done the right way

Business must be done the right way
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First Published: Wed, Oct 27 2010. 11 17 PM IST
Updated: Wed, Oct 27 2010. 11 17 PM IST
Radical pro- and anti-business stances have been articulated in these past months, peaking recently with an official committee’s recommendation to withhold from Pohang Iron and Steel Co., or Posco, several forest and environment-related clearances for its proposed 12-million-tonne per annum project in Orissa.
Opponents of the project accuse Posco of wholesale wrongdoing, and their hardline colleagues wish to banish any large project—period. Proponents of the project assert that Orissa and India are losing precious time to create industry and jobs, and the same folks who will scream about inequitable growth some years down the line are helping to create it right now.
Both miss the point.
It is myopic of activists to negate a project merely for the sake of taking on business. The result will be counter productive, assuming we wish to move beyond a pastoral economy. Equally, it is myopic of businesses to be shrill in defence.
The bulldozing through of several projects has been on account of flaws in structure, process and accountability. Until that is sorted out, disruption of such projects will be the norm, not the exception.
In nearly every marquee project that has faced hurdles in recent years—the key ones among several are Tata Motors Ltd in West Bengal; Lafarge Umiam Mining Pvt. Ltd in Meghalaya; Tata Steel Ltd, Vedanta Resources Plc and Posco in Orissa—opposition has come about usually over land acquisition, displacement, rehabilitation, or environmental clearance.
In many such cases, the state government has been loud in assuring businesses everything will go smoothly.
Then, it has used its administrative and law and order machinery to ensure land is either directly or indirectly acquired for the project. This has included a range of actions from convincing and cajoling, to pressuring and attacking people. Several dozen people have been killed by police and thugs of ruling political parties over land acquisition.
Environmental clearances have been rapidly, even incorrectly, provided at the state and central levels. The people whose land is to be acquired have typically been the last to be queried in the political-economy food chain.
Businesses have directly or indirectly participated in the process. They are by every definition complicit, and cannot escape moral and fiscal liability.
When people—victims, activists, lawyers, and with decreasing frequency, the media—point out how due process has been subverted, businesses complain and invoke the right to industry. It is as if due diligence, that red herring norm of corporate governance, applies only for the funding of projects, not the projects themselves. Hypocrisy needs to abate for opposition to such projects to lessen. Both businesses and state governments need to look for solution-oriented situations.
They could look to Haryana. After several hiccups over special economic zones, the state has made a qualified success of its move away from the practice of arbitrary state-mandated acquisition of land for projects along with random fixing of compensation, to direct buyer-seller transactions, with compensation fixed into annuity structures—so that sudden large incomes are not frittered away by sellers of land—and several other compensation devices.
A group of ministers is engaged in developing an approach for compensation for mining projects. Other templates and precedents are being studied by chambers of commerce and economic research institutes. Transparency is seen as a constant. But the basic requisite remains attitude. I’ve had several discussions with lawyers and conflict resolution specialists. Most are of the opinion that generally, business and government entities in India are either ignorant or dismissive of the principles of human rights that increasingly affect business. What is equally worrisome, they maintain—and I hope to address these issues in greater detail in forthcoming columns—is that several companies, both Indian and overseas, operate diligently outside India, but change spots when it comes to doing business in a bent India. The system permits its own willful corruption, and companies exploit it to the hilt.
Business will increasingly find that victims, activists and lawyers will attempt to take them to the cleaners using rights as mentioned in the Constitution of India. They will use in both local and international courts devices such as the Universal Declaration of Human Rights, international covenants for civil and political rights, and various conventions of the International Labour Organization. These devices will be backed by data, statements of the aggrieved, and viral public pressure. (Such ammunition is potent, as several Fortune 500 companies have learnt to their cost.)
Business needs to be done the right way. It’s either that, or disruption.
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, Oct 27 2010. 11 17 PM IST