Stakeholders drive a stake through Vedanta’s Orissa project

This is the second in our series of ‘Snapshot’ articles, designed to provide a rapid view of socio-political risks facing resource projects based on the LicenseSecure framework. In this article we look at the latest developments in the long-running controversy over Vedanta’s proposed mine in Orissa, India.

Explanation: UK-listed Vedanta Resources’ proposed bauxite mine in Orissa was controversial even two years ago. Since then stakeholder criticism has mounted further, placing pressure on national decision-makers to oppose the project. Most recently, in August, India’s environment ministry rejected plans for the mine following a review of its potential impacts. All this is reflected in a downgrade in the project’s rating from ‘vigilance’ to ‘hazard’ grade, based on a rapid LicenseSecure analysis.

The Indian government’s move follows a high-profile community and NGO campaign drawing international attention to the mine’s impacts, particularly on the 8,000 member Dongria Kondh tribe living nearby. Among the tactics adopted by campaigners over the years have been protests outside Vedanta’s AGMs, celebrity endorsements, lobbying pension funds to divest and a complaint under the OECD Guidelines.

Vedanta has consistently defended its conduct and says the mine will not violate tribal rights and will bring employment and other benefits to a poor area. It has helped fund, for example, a ‘project area development foundation’ that will provide schools and clinics among other projects. Even so, our review of the evidence suggests Vedanta has not tackled all the issues of concern. It also appears to have relied too heavily on legal permissions granted in 2008 and engaged insufficiently with the local community, NGOs, the OECD and other stakeholders.

Vedanta may have originally considered the mounting campaign against it as a minor ‘reputational’ irritant. What it has discovered is a lesson which will be familiar to many other extractive firms: that if insufficiently managed, and if underlying grievances are not tackled at their roots, such irritants over time can cause multi-billion dollar projects to grind to a halt.

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Background on LicenseSecure: The LicenseSecure™ framework assesses the health of the ‘socio-political license to operate’ for resource projects. A decision tool for resource firms and their financiers, it aims to support far-sighted, responsible management of sustainability and stakeholder issues around these often critical investments.

LicenseSecure has been developed by Critical Resource over a number of years, based on an analysis of 60+ projects which have suffered challenges to the license to operate (for example where the host government has toughened fiscal terms or communities have impeded operations). The model assesses a project’s socio-political context and the quality of its management of these issues across six key categories, drawing on some 150 indicators. It is supported by an extensive database of projects which allows benchmarking and rapid assimilation of lessons from parallel projects.

Declaration of interest: Critical Resource has supplied information to Vedanta on LicenseSecure

Photo of Dongria Kondh girl: © Survival

* NB this brief provisional analysis is based on desktop research and does not constitute a formalLicenseSecure rating.