Envis Centre, Ministry of Environment & Forest, Govt. of India

Printed Date: Tuesday, July 23, 2024

Global mining and its pitfalls


Date: May 28, 2013


Unrest in coal-rich Mozambique is a fallout of weak regulation, and not the opposite. This applies to India too.


From Australia to Mozambique, Indian mining firms are taking the lead on lucrative, globally important projects. But some of these opportunities come with serious human rights risks that could threaten both the reputation and financial health of Indian companies.


In too many countries, mining firms find themselves in situations where decent laws might exist on paper but the reality is a weak government that doesn’t provide meaningful supervision or regulation. This is not in anyone’s interests, and Indian miners ought to know that better than most. Just ask mining firms in Karnataka and Goa that faced industry-wide shutdowns when officials moved belatedly to tackle abuses that had spiralled out of control.


Mining firms have their work cut out for them if they want to avoid similar pitfalls overseas.




Consider the case of Mozambique. The country’s underdeveloped Tete province boasts some of the world’s finest untapped coal deposits. Companies from around the globe have rushed in to take part in their development, including Jindal Steel and Power, which plans to invest some Rs 1,000 crore ($US 180 million) in its Chirodzi coal project. But Tete has not been an easy place for mining firms to stay out of trouble. Indeed, Jindal has already watched Brazil’s Vale and Australia’s Rio Tinto, two of the world’s largest mining firms, stumble badly there, with terrible consequences for the communities around them.


Vale and Rio Tinto have had to resettle several thousand people whose communities stood in the way of their massive new coal projects in Tete. This week we released a report that details how the two companies have not only failed to carry out resettlements that respected the rights of those families, but left many of them worse off than they were to begin with.


Farmers who had been largely self-sufficient were moved on to arid and unproductive land. Crops have failed and water is scarce. The resettlement sites are also quite literally in the middle of nowhere, so communities that used to depend on vibrant local markets now find themselves economically and geographically isolated. Many families that had been mostly self-sufficient are now dependent on sporadic handouts to make ends meet.


Both companies set out to do better than this – and to be fair, Rio Tinto inherited many of these problems after buying out another firm. But they have fallen short, and people are angry. Protestors have disrupted Vale's operations on numerous occasions and blocked the vital rail link that carries coal from Tete to the coast for export.




Will Jindal fare any better? The company will ultimately have to relocate nearly 500 families to make way for its Chirodzi project, and another 968 will lose their farmland but not their homes. There are signs that Jindal has learned from Vale and Rio Tinto’s failures and is determined to get better results. But this might be easier said than done, and the project's risks won't end with resettlement. Mining operations almost always have a long-term, complicated impact on the communities around them.


Perhaps the most important lesson Tete has to offer is that even the most sophisticated or well-intentioned global firms can’t compensate for the absence of a strong, competent government. This is especially true when companies are working overseas, with cultures and communities they are unfamiliar with. Vale and Rio Tinto didn’t fail by themselves. The Mozambican government has not properly overseen or guided their resettlement efforts.


Some international mining companies treat government overseeing as anathema and seem happiest in weakly governed spaces. Because of their experiences at home, though, Indian mining firms should understand why that attitude is short-sighted and ultimately counter-productive. In the long run, the lack of a strong government role spells trouble for both the industry and the communities around it. None of India’s mining firms want to invest their money abroad only to find themselves confronted with a Goa-style crisis..




What does this mean for Indian companies with projects in countries like Mozambique? Instead of rushing forward recklessly they should move deliberately and cautiously, and encourage governments to do the same. Emerging international norms like the UN’s Guiding Principles on Business and Human Rights place considerable emphasis on the concept of “human rights due diligence”. This is the idea that companies have an obligation to identify the potential and actual human rights impacts of their operations and then take effective steps to avoid, mitigate or address them.


In Jindal's case, the company should take care to consult extensively with the affected communities every step of the way and ensure that they end up at least as well off as they were before the company came. Over the long term, Indian mining companies should welcome efforts by governments where they have mining projects to develop robust, independent regulatory and oversight capacities. That way, officials will be able to tell companies how to responsibly navigate troubled waters. Indian companies should also encourage other multinational firms to adopt the same approach. This is not only good from the perspective of vulnerable communities whose lives and livelihoods hang in the balance, it is also good business.



Author: Chris Albin-Lackey

(Source: http://www.thehindubusinessline.com/)