New Delhi: Posco-India Pvt. Ltd’s $12 billion (Rs 55,200 crore today) Orissa steel project, stuck for the last six years because of environmental objections, was given the go-ahead by the Union government in a move that may allay investor concerns about India’s business environment.
To be sure, the government has also set several conditions that Posco should fulfil, but environmentalists and analysts have termed these as being little more than token gestures.
The plant is to be constructed in east Orissa on more than 4,000 acres, 75% of which is forest land, and will be India’s largest foreign investment project since 1991. The reasons for the six-year hiatus include possible environmental damage, and the displacement of forest dwellers and the threat to their livelihood.
In a 50-page note, environment and forests minister Jairam Ramesh said that environmental clearance for the steel-cum-captive power plant was being accorded with 28 additional conditions over and above those stipulated in previous clearances accorded by the ministry.
Crucially, the order also states that the clearance hinges on the Orissa government’s assurance that forest land will be diverted in provision with the Forest Rights Act—a key point of contention between the state government and those opposed to the plant. The state government has contended all along that there will be no displacement of indigenous peoples in the forests. That contention has been rejected by activist groups.
These additional conditions also include Posco ensuring that the entire project meets nationally mandated air quality standards, allotting 2% of its annual net profit for corporate social responsibility (CSR) and ensuring that 25% of the project constitutes a “green area”.
Moreover, clearances for an ancillary captive mining port were also given on the back of 32 other conditions that essentially entail no construction in specific regions along the coast as well as monitoring the health of the coastal region being exploited.
An official statement from Posco as well as reactions from industry lobbies welcomed the decision, in the light of concerns that environmental concerns were starting to impact foreign direct investment.
“We welcome and accept with humility and gratitude the decision... We fully appreciate the concerns of different stakeholders on sustainability of environment as well as livelihood of affected people,” Posco said in a release. “As a responsible corporate citizen of India, we will continue to work for the welfare of the local community and plough back a part of earnings for CSR after the operations commence.”
In an emailed statement, Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry, said, “In producing a careful balance between developmental goals and growth objectives, optimal level of environment protection, and concern for the human dimensions of change, we welcome the Posco clearance. This clearance will also signify that environment and development can go hand in hand.”
Analysts say that the environment ministry has overridden concerns of its own expert committees and left several key issues unanswered.
“The main concerns were whether a project of this magnitude ought to be analysed in totality and the extent of displacement of forest dwellers and those eking a livelihood out of it,” said Ritwick Dutta, a specialist in environmental law and a Mint columnist. “The first point wasn’t addressed at all and in the second, the ministry has rejected the reports of three of its own advisory committees.”
N.C. Saxena, a member of the National Advisory Council, who headed a committee investigating the Orissa government’s compliance with the Forest Rights Act, said he was largely satisfied with Ramesh’s decision.
“Issues around the displacement of tribals have been addressed. However, those who aren’t tribals, but depend on the forest for livelihood, have not been compensated. That’s a drawback in the clearance report,” he said.
Another former environment ministry official said that the government body had “overreached” in all of its conditions.
“The environment ministry really has no locus standi to ask a company to devote a certain percentage of profits to CSR,” he said. “It also does not have any reason to set conditions on rehabilitation and resettlement issues and tribal rights, as these do not fall under its ambit. This is a clear case of overreach of authority.”
One of the principal organizations opposing Posco’s plans was vehement in its response.
“We condemn this declaration by the minister. The minister is behaving like a company agent because two committees under the same ministry have given negative remarks against the project and the minister has overlooked those objections,” said Prashant Paikaray, a spokesman for Posco Pratirodh Sangram Samiti. “Now we will make it a national movement against Posco, the state government and the Central government.”
Ramesh declined to make further comments. In his note, however, the minister said that he had reached his decision after consulting the ministry of tribal affairs as well as a careful perusal of the panels’ observations.
Posco planned to develop the project in three phases, with the first phase of four million tonnes to start running by end-2011. The rest of the project was to be ready by 2016.
Unlike the case of Vedanta Aluminium Ltd, where the environment ministry rejected bauxite mining rights in Orissa, the Posco project has not yet started. The construction of the Vedanta project was almost complete.
Asit Ranjan Mishra and Amrit Raj also contributed to this story.