A recent report puts hugely positive numbers against increased M&A activity in the Indian metal and mining industry, finding that 2009 saw an increase of 45% in deal count and 173% in deal value compared to 2008. The flip side of this story is how delays and disputes continue to make headlines. The latest development on this front is that the Supreme Court asked the French cement giant Lafarge to seek fresh environmental and forest clearance from the Centre before resuming limestone mining in the east Khasi hills of Meghalaya. The project in question is intended to supply raw material to Lafarge?s cement plant in Bangladesh. The delay is especially controversial for two reasons. First, there is the potential for diplomatic complications, given that India had guaranteed Bangladesh an uninterrupted supply of limestone. Since Bangladesh is short of limestone reserves, there are claims that delays in this project will not just hold back our neighbour?s cement plant but also its overall economic development. Second, it has been alleged that Lafarge transferred tribal land to itself in violation of the Indian Constitution?s Sixth Schedule and then mortgaged it to international banks. As lawyers and concerned parties trade charges, what?s evidenced is the scale of the cost being paid for India?s confused mining policies?now extending beyond domestic economics to international politics.
There is chaos in the Union government ranks. Just yesterday, it was reported that steel minister Virbhadra Singh is asking the finance ministry to increase the export duty on iron ore. This is part of the ongoing turf battle with the mining ministry. Last week, PM Manmohan Singh was playing umpire between environment and forests minister Jairam Ramesh and surface transport minister Kamal Nath, power minister Sushilkumar Shinde, water minister Pawan Bansal and others. It?s the contention of Nath, Shinde, Bansal and party that developmental projects are being gratuitously held back by Ramesh?s ministry. Now a few states are also at odds with Ramesh. His defence is that the Union environment and forests ministry is only trying to protect India?s ecological security. He has accused state governments of deliberately delaying the notification of buffer zones for wildlife reserves. As this factitious back and fro continues, India is seeking to incentivise foreign funds into mining. Legislative amendments that would make the sector more investment-friendly are constantly being tom-tomed around. But how can the sector register smart growth as long as confusion prevails? Investment requires the bedrock of certainty.
