French cement giant Lafarge, whose mining activities for extracting limestone were stalled last month by the Supreme Court, has admitted that it mortgaged tribal land in Meghalaya to international banks to secure a loan of $153 million. The mortgage is meant to finance its $255-million manufacturing plant in Bangladesh.
However, it said the mortgage of the land as security to offshore lenders was approved by RBI in March 2005. The lenders include the Asian Development Bank, the International Finance Corporation, Deutsche Investitionsund Entwicklunggesellschaft, the European Investment Bank, the Arab Bangladesh Bank and the Bangla-desh arm of StanChart.
The Lafarge Surma Cement (LSC) project at Chhatak, Sunamganj, in Bangladesh, is fully dependent on supply of limestone, a raw material used for manufacturing cement, from East Khasi Hills in India.
The company needs the court?s approval to resume mining operations at the mortgaged land. The Bangladesh government is worried, it said, with the closure and wanted to pursue an early resolution to the issue with the Indian government.
In an affidavit filed before the apex court on Tuesday, Lafarge, through its vice-president and director Narayan Prasad Sharma, said the mortgage to international lenders as per the applicable laws was valid till the loan was fully repaid by the French company.
According to the company, the mortgage was insisted upon by the lenders in view of the complexity and risk profile of the project.
RBI also agreed that the permission for mortgage of the tribal land to offshore lenders was necessary to ensure uninterrupted supply of limestone from there to the cement plant. Only if the plant was operational, the firm argued, could it service the loan.
The commitment to finance was also based on a commitment executed between India and Bangladesh to support the project. As part of its affidavit, Lafarge also produced a letter written by the International Finance Corporation to the finance ministry on March 8, 2010, underscoring the commitment to fund the project.
Stating that LSC would hand over all the land along with the documents to the landowners at the end of the operations of the mining project, the affidavit said Lafarge had not violated any condition precedents which were the basis for according approval for transfer of tribal land or mortgaging to offshore banks.Lafarge also rebutted claims that it has exported the raw material at cheap prices to favour its Bangladesh subsidiary. It said limestone was sold to LSC at $11 a tonne, which is 37.5% higher than the government-notified minimum export price of $8 per tonne and so satisfied the arms-length pricing principle. ?This has resulted in an invoice value of $10.2 million above the value based on the government of Meghalaya notified price,? it said, adding it was exporting limestone to Bangladesh at a higher price than other exporters.