Progress?

On its website, mining giant Vedanta Resources chooses to describe itself as an "exceptional diversified mining company with a world class resource base." Its yearly turnover in 2010 was $US 7.8 billion. Yet, the successful leviathan seems to be caught in a web of legal hurdles.

India’s Ministry of Environment and Forests decided last week it would take the final call on whether the company would obtain mining rights in the Niyamgiri hills in eastern India. The hills in the state of Orissa are known to have rich bauxite reserves, but the land also provides a livelihood to the Dongri Khond, a tribal people who would be directly affected by any attempt to remove them from the forest.

The Vedanta incident is not an isolated case. Tata Motors also faced the wrath of local politicians and farmers when it decided to set up a factory for its $2500 car, the Tata Nano, in 2008. Local politicians and farmers joined together in their campaign against the industrial major, which eventually decided to move operations to another location. Land is now being given back to the farmers. In a recent petition filed in court, Tata Motors said it had registered a loss of nearly $31 million as a result of delays caused in setting up the plant.

Problem of rehabilitation

Dr B. Roy of the Indo-German Chamber of Commerce says that the problem is not that land is scarce in India, but that the people who live on the land need to be provided with alternative living arrangements before factories are set up.

"People have to be removed from there and that is a very big issue," he told Deutsche Welle. "The government cannot just close its eyes to the problems of the masses. In fact, in India today, one of the major problems of getting land for industry, for mines, for steel plants, for anything, is the rehabilitation problem."

For tribals, such as the Donghri Khond, the protection of forests and the environment contributes greatly to ensure their livelihood.

International agreements on climate change and environmental protection have prompted India's government to tighten regulations in order to reduce CO2 emissions.

"The global governance is changing," explains Dr. Sujit Bhattacharya of India's National Institute of Science, Technology and Development (NISTAD) "Once you have a binding clause, it becomes difficult for a country to do things the way it was comfortable doing."

Regulation need not hinder development

However, environmental protection regulations do not necessarily need to be a hindrance to economic development, Dr Bhattacharya points out.

"We have found that acquisition and capturing natural resources in many different places across the world is the key idea to Indian firms' competitiveness," he says.

But he does have another concern: “While India may continue to remain an attractive investment hub, the chances are that the economy, which is moving from an agricultural economy to one based on services, may lead to those people whose competence lay in agriculture becoming jobless,” he fears.

This is exactly why for Dr Roy, the key to addressing environmental concerns, protecting livelihoods and safeguarding investments is to create "a comprehensive plan.”

“There has to be a compensation package,” he says. “You cannot take away the farmers' land and say: ‘You take this money and do whatever you like.’ It's a big social problem. The industries have to realize you cannot take a shortcut by just setting up a plant."

However, he is not worried that India will lose its attraction for investors either. Indeed he hopes the government’s new policies to boost investment in areas that were not open to foreigners before will help maintain the high rate of economic growth.

Author: Manasi Gopalakrishnan
Editor: Anne Thomas