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Corporates cheer as India's oil minister takes charge of green clearances

Source: Reuters - Mon, 3 Feb 2014 07:26 GMT
Author: Reuters
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A worker walks atop a tanker wagon to check the freight level at an oil terminal on the outskirts of Kolkata, Nov. 27, 2013. An REUTERS/Rupak De Chowdhuri
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By Frank Jack Daniel and Nidhi Verma

NEW DELHI, Feb 2 (Reuters) - Veerappa Moily has two seemingly incompatible jobs.

As oil minister, he has overseen India's petroleum and natural gas needs. But now he also runs the environment ministry, where he has issued permits for 100 stalled projects in a month-long spree that has delighted industry but shocked green activists.

Since taking the additional environment portfolio on December 24, he has given his go-ahead to projects worth some $40 billion, including Posco's $12.6 billion steel plant and forest clearances for India's first major hydropower projects in the wilderness state of Arunachal Pradesh, near a contested border with China.

Moily's haste is part of a last-minute push by India's outgoing government to revive investment in the economy after two years of growth at decade lows. The general election is due by May.

But the friction the clearances have generated go to the heart of a long-standing dilemma: how to develop quickly in a country still plagued by poverty while minimising damage to the environment.

In an interview in his oil ministry office, under an image of a drilling rig, Moily said his approval push was "necessary".

"On the planet there is space available for the wildlife, for the forest and also for the human being," he said, vowing to take decisions by Feb. 15 on a backlog of projects worth about $100 billion.

Moily is no stranger to controversy. Last year he was widely ridiculed for proposing to close petrol pumps at night to help curb oil imports as the rupee slumped to record lows.

Environmental campaigners are outraged at Moily's twin jobs, accusing him of steamrolling opposition to some projects from tribal populations and ignoring concerns about biodiversity. One group dubbed his appointment "shocking and bizarre."

"You have given speedy clearances by ignoring all the stakeholders except the corporates," Greenpeace said in an open letter to Moily. Citing a "clear conflict of interest" between his two portfolios, it demanded his resignation.

Moily denies he is unduly favouring industry, saying he will not bypass environmental rules to clear a backlog of decisions. He cited his rejection of Vedanta Resources Ltd's plea to mine bauxite in the Niyamgiri hills of Odisha state after local residents opposed it.

"It is not a question of favour. If you are not taking a decision, ultimately what happens ... you are working against the interest of the nation," he said.

PRE-ELECTION HYPERACTIVITY

Even though Moily's environmental clearances are in some cases the final hurdle in India's notorious thicket of bureaucracy, it will still take time to get the projects going. Tight liquidity makes raising funds tough right now and, before investing, many companies will wait for the formation of a new government.

Still, many say the 74-year-old minister - who rises at 4.30 a.m. and works into the evenings juggling dossiers from the two ministries - has an eye on the coming election.

"Clearly, it's a move to try and get things going before the elections. One last chance for the government," said Sam Mahtani of F&C Asset Management in London, which manages $4 billion in emerging market equities.

Moily's hyperactivity coincides with the rise of opposition leader Narendra Modi, who has won popular support presenting himself as a man of action trusted to revive the economy, build roads and create jobs by slashing red tape.

"We welcome the speed with which a number of projects have been given environment and forest clearances," said Sidharth Birla, president of the Federation of Indian Chambers of Commerce and Industry. "This would stimulate investment activity in the economy and also shore up investor confidence."

The outgoing government has targeted spending $1 trillion on infrastructure projects over the five years to 2017, but it has fallen short of previous goals and much of the country is plagued by power blackouts and bumpy roads.

After being panned for dragging his feet on decision making, Prime Minister Manmohan Singh last year formed a cabinet body to track stalled projects. In many cases, bottlenecks were traced back to the environment ministry.

In five weeks, Moily has softened the rules for coal mine expansion, allowing some to increase output by 4 million tonnes per year without further approvals. He has made it easier for mines to renew leases, cleared an oil pipeline and given a crucial permit for a coal power station planned by Hinduja National Power Corporation Limited.

"There was a problem in the Ministry of Environment and Forests," Finance Minister P. Chidambaram told an Indian daily last week. "But I think that problem has been fixed now."

(Additional reporting by Devidutta Tripathy and Krishna Das in NEW DELHI; Editing by John Chalmers and Raju Gopalakrishnan)

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