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April 01, 2011
life in financial markets: how companies & politicians collude to damage the environment and violate human rights
In my understanding, Dow Chemicals is a dangerous company. But no dangerous company in the world who causes danger to damage the environment and violates human rights can get away with it for too long.
The Hindu newspaper which has been carrying a series of Wikileaks' documents of US consulate officials in India has a story that exposes Dow Chemicals manipulative activities in India.
I share below the text of three things -- (1) the US consulate official's cable talking of Dow Chemicals which is published in today's edition of The Hindu, (2) the analytical newsreport carried by the newspaper today on this issue and (3) a statement issued today by the local group of villagers fighting the Dow Chemicals project.
RUEHKT/AMEMBASSY KATHMANDU 0619" "C O N F I D E N T I A L SECTION 01 OF 03 MUMBAI 000491
E.O. 12958: DECL: 11/15/2023
TAGS: EINV, EIND, ECON, PGOV, IN
SUBJECT: DOW CONTINUES TO RUN THE GAMUT OF INDIAN POLITICS
REF: MUMBAI 459
CLASSIFIED BY: BANSALG, ECON, ECON, STATE.
REASON: 1.4 (b)
1. (SBU) Summary. On October 1 Maharashtra Chief Minister (CM) Vilasrao Deshmukh ordered a halt to construction of the Dow Chemical Company's Research and Development facility near Pune until a commission can review Dow's plans. The CM ordered this halt to defuse broadening protests against the construction of the facility, which had risen to the attention of major political leaders outside the state. Dow is dispirited by this move, and blames continued local political problems and corruption for the problems. Protest leaders say that Dow needs to answer the villagers concerns, and hope the conflict can be resolved peacefully. Dow is contemplating other options - including pulling out from the site - but fears that protests will dog its investments elsewhere in the country. In this, Dow continues to underestimate the political ramifications of its purchase of the assets of Union Carbide, a company whose legacy in Bhopal still provokes fear and concern in Indian communities. Meanwhile, political opportunists and grassroots politicians seek advantage in the travails of Dow, while senior political leaders find it difficult to confront head on a situation that seems combustible. End Summary.
Maharashtra Chief Minister Puts Dow Project on Hold
2. (SBU) On October 1, Maharashtra State Chief Minister Vilasrao Deshmukh announced that he was ordering a halt to construction of Dow's Research and Development facility for at least 30 days. (Note: Deshmukh made the announcement from London; he had traveled to the U.K. and the U.S. to promote Maharashtra as a good investment destination. End Note.) Dow began construction on the facility -- a $100 million research and development facility outside of Pune which will eventually employ 500 scientists - this year. This facility is located in a new industrial area developed by the Maharashtra Industrial Development Corporation (MIDC) about 40 kms from Pune, rural land that had previously been used for grazing. Dow's facility has been plagued with] protests, largely stemming from Dow's 2001 purchase of the U.S. remnants of Union Carbide, the company responsible for history's largest industrial accident in Bhopal, India, in 1984 where over 3000 people were killed (see reftel for background). When protests at the facility turned violent in July, the state government assigned round the clock police protection to secure the site. Construction resumed, but the agitation against the facility had grown and diversified.
Protesters Increasingly Diverse. And Effective
3. (SBU) According to Dow, three major groups have combined to protest Dow's facility. The initial groups consisted of NGOs and activists involved in the campaign for justice on behalf of the victims of the Bhopal tragedy. These activists have targeted Dow since its purchase of Union Carbide, and have protested Dow's operations throughout India. According to Dow, these activists have told villagers about the Bhopal tragedy, and invoked fear that Dow would do the same at this site. The second faction is led by local Shiv Sena Member of Parliament, Shivajirao Adilrao Patil. While Dow has met Patil several times to explain the nature of their facility, Patil has continued to stir up trouble against the company, and has led several protests. The third angle stems from concerns by a popular local religious sect, the Warkaris, who worship at a river shrine about 60 kilometers from the site. They fear that Dow will dispose of chemicals at the site, which will pollute the groundwater and the river they revere.
4. (SBU) Dow representatives told Congenoffs that Warkari leaders met recently with visiting Union Minister for Agriculture Sharad Pawar, who is from Maharashtra, to protest the Dow facility. According to Dow, Pawar dismissed their complaints, telling the religious leaders that Dow is a good company, and that they should not interfere in the industrial policies of the state. This prompted the Warkaries to publicly denounce Pawar and his connection with Dow, and threaten to protest during the Commonwealth Youth Games which are to be held in Pune in October. Dow said that Pawar subsequently asked CM Deskmukh to stop the construction until a commission can review the charges. This will be the second state-appointed commission
MUMBAI 00000491 002 OF 003
to look into charges that Dow could pollute or damage the environment at this site. Dow representatives said that Deshmukh called Dow CEO Andrew Liveris to reassure him about Dow's investments, and said the commission will take two months; Liveris, increasingly frustrated, told Deshmukh that it needs to take less than one month.
Patil Says That Dow Needs to Do More to Meet Village Concerns
5. (SBU) In a September 25th meeting with the Consul General, Shivajirao Adhilrao Patil expressed his desire to resolve the dispute peacefully. He informed the CG that he opposes the project because the local villagers are not informed about the project, and do not want it. Even though the state government owns the land, the villagers look after it and they should have been taken into confidence. As a business owner himself, Patil said that he is usually very pro-business and claimed to have helped create one of the largest Special Economic Zones (SEZs) in the country on 5,000 acres in his constituency which already has operations by multinationals like General Motors and Hyundai.
6. (SBU) According to Patil, the villagers learned that Dow was connected to Union Carbide from newspaper stories. Patil said that Dow has drilled dozens of holes near the site and run pipes throughout the area, and villagers feared that Dow will pollute their groundwater and sacred rivers. Patil informed the CG that he responded to the villagers concerns by meeting representatives of the National Chemical Laboratory who showed him that the approvals that Dow had received. These documents showed that the company had received permission to manufacture chemicals. According to the MP, this was startling news. He explained that even the Environment Department had not been aware that the company had received permission to manufacture chemicals.
7. (SBU) In July 2008, Patil met Dow's CEO and stressed that the company needed to explain the project to the villagers, preferably through a public relations agency that was experienced at this. The MP stated that company ignored his advice and decided to rely on police force and started work on the site. Patil noted that it was because of this decision that the Warkaris started protesting and a Dow vehicle was burned.
8. (SBU) Patil reassured the CG that the safety of any American or Indian working for Dow will not be compromised. However, the strong police presence is focusing anger at Dow, and the situation could get out of control. He advised that Dow should go slow for now and reduce the police presence, and work harder to convince villagers that the facility is truly a research and development facility. He still thought that Dow should hire a public relations agency like the one that the local company Bharat Forge hired when it ran into problems, and give donations to local villagers to resolve the situation.
Dow Says Corruption and Politics At Root of the Problem
9. (SBU) On September 29, Congenoffs met with Rakesh Chitkara, Dow's Head of Corporate Affairs, to discuss the recent developments. Chitkara said that Dow has met with Patil several times to clarify issues. Three months ago, the company hired the public relations specialist Patil recommended for USD 20,000 per month. (Note: Chitkara said that the PR specialist is a ""close associate"" of Patil. End Note.) They have also hired a number of local villagers for construction projects, helped refurbish a local school, expanded water services, and acted on a number of other public works projects that were requested in writing by the local village council.
10. (SBU) On the issue of drilling holes into the ground, Chitkara countered Patil's charges, stating that Dow has been drilling holes to study the soil strata which is standard construction practice; he added that after receiving government approval, four holes had been drilled to ascertain the water content of the subsoil. He noted that the soil contained no water so water is currently being brought to the site by tanker, not the local rivers; furthermore Dow shares this tanker water with a Korean company, Hyundai, which is also building at the site (and has had no problems).
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11. (SBU) On the charge that their approval allows them to manufacture chemicals, Chitkara countered that the state application forms do not have a category for R and D facilities, and it was mistakenly labeled as a manufacturing facility. Dow had taken the step to rectify this language to show that manufacturing will not take place at the site. (The facility will be used to research and develop chemical applications for alternative energy and transportation.) He added that all of the information that he had shared with us had already been shared with Patil -- repeatedly.
12. (SBU) Chitkara said that the company was pessimistic that the Maharashtra state government will make any decisions in the time period specified by the Chief Minister. Moreover, Maharashtra Chief Secretary Johnny Joseph called Dow to express his support, but asked for time to defuse the situation. Dow expects the state government to appoint another committee to review the claims against Dow, all of which had been answered before. In the meantime, the company is losing USD 250,000 a month. Dow CEO Ramesh Ramachandran told Congenoffs that these protesters are seeking a ""buy-out,"" but have not yet ""internalized"" that Dow will not pay.
Dow Faces More Problems with Gujarat Project
13. (C) Chitkara said that Dow is also having problems with its investment in a Gujarat state-owned company. The investment requires approval from the Foreign Investment Promotion Board (FIPB), which it expected because of support from the Gujarat government and the Finance Ministry. However, Dow was told that the Ministry of Chemical and Fertilizers has put a hold on the project. According to Chitkara, however, when agents of Dow met with Union Chemical and Fertilizer Minister Ram Vilas Paswan, he demanded a large sum of money from the company before he would support the project. The company refused to pay and the investment remains on hold. Dow has also discussed this problem with Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, who was reportedly sympathetic, but unable to overcome this opposition. [Note: It is unclear at this stage what ostensible reason the Chemicals Ministry offered to the FIPB for not approving what is a routine application. End note].
14. (SBU) Dow has told Congenoffs that they do not have infinite patience for the political and other problems faced by their business in India. While Dow could write off the $15-20 million of their investment so far, the company fears it could face protests and harassment wherever it settles in India. Clearly, Dow has become an easy target for politicians seeking to exploit the company's situation, especially as state and national elections are just around the corner. Currently, Maharashtra is run by a coalition under a weak and ineffective Chief Minister. While another commission could put this issue off the table for a few more months, opposition politicians have found a combination of issues close to the hearts of their voters: land, environment, livelihood, and religious devotion. In relying on the promises of protection of the state, Dow continues to underestimate the political ramifications of the company's connection to the legacy of Bhopal and Union Carbide. End Comment.
(2) The analytical story in The Hindu newspaper today
The U.S. Consulate in Mumbai reports on the manoeuvres of the Dow Chemical Company to get its plants cleared, and the contradictory responses of powerful politicians
The Dow Chemical Company, an American multinational that bought the infamous Union Carbide, appointed a public relations manager recommended by a Shiv Sena parliamentarian at a generous monthly salary of $20,000. This was done in the hope that it would put an end to the protests the politician was spearheading against its proposed research facility in Pune.
Over in Gujarat, the company had to put on hold a proposed investment by its European arm in a state-owned unit because a Union Minister allegedly “demanded a large sum of money” to clear the project, which Dow refused to pay.
These allegations are contained in a confidential Mumbai Consulate cable sent to the U.S. State Department in late-2008 and accessed by The Hindu through WikiLeaks.
Asked by The Hindu to respond, the two politicians, Shiv Sena MP Shivajirao Adhalrao Patil and Ram Vilas Paswan, at the time the Union Chemicals and Fertilisers Minister, denied the allegations as totally baseless. Attacking Dow and Union Carbide as “criminals in my mind,” Mr. Paswan asserted that they were trying to tarnish his image because he and his Ministry “strongly opposed their plans to establish a presence” in Gujarat even while “the case of remediation costs for the Bhopal disaster” remained unresolved.
The cable was sent under the name of Consul-General Paul A. Folmsbee (173725: confidential, October 15, 2008) after Consulate officials reported they had heard detailed separate versions of Dow's troubles from company representatives and the Shiv Sena MP, Shivajirao Adhalrao Patil.
The cable drew an outline of politicians seeking to exploit Dow's handicap in India – arising from its association with Union Carbide and the legacy of the 1984 Bhopal gas leak disaster – for direct or indirect personal benefit. But even where politicians and government functionaries were reassuring or sympathetic, when crunch-time came, they were of no help.
As for Dow, the Mumbai Consulate concluded it did not have the nous to grasp the political implications of being associated with Union Carbide and the legacy of the Bhopal gas disaster, especially with the 2009 parliamentary elections just months away.
Dow's Pune facility was to come up on 100 acres of grazing land in Chakan, Shinde village. Just a day before the Maharashtra government ordered a temporary halt to the construction at the site on September 26, 2008, and appointed a commission to inquire into the complaints against it, the Consul General had met Mr. Patil, the Shiv Sena MP from Shirur in Pune district, to talk about the protests against Dow.
Dow's behind-the-scenes manoeuvres
The politician had expressed “a desire to resolve the dispute peacefully.” The villagers should have been informed about the project, he said.
The Mumbai Consulate noted that the Warkaris, a local community, worshipped a river shrine and were convinced that Dow's activities at the facility would pollute the river and groundwater sources.
Mr. Patil told the U.S. officials that the villagers had learnt about Dow's connections to Union Carbide. He said the approvals Dow had received for the facility related to the manufacture of chemicals, which was at variance with Dow's description of the facility as a scientific research centre.
The Shiv Sena MP also said he had advised Dow to explain the project to the villagers, “preferably through a public relations company that was experienced at this.” However, he lamented, the company had ignored his advice and instead relied on police force and started work at the site.
“Patil noted that it was because of this decision that the Warkaris started protesting and a Dow vehicle was burned,” the cable informed the State Department.
Mr. Patil then reiterated advice he said he had given Dow in July 2008 about hiring a public relations outfit for this purpose — “like the one that the local company Bharat Forge hired when it ran into problems, and give donations to local villagers to resolve the situation.”
On September 29, Rakesh Chitkara, Dow's Head of Corporate Affairs, met Consulate officials (the cable does not name them). He told them that three months earlier, Dow “hired the public relations specialist Patil recommended for USD 20,000 per month.” In parenthesis, the cable added: “Chitkara said that the PR specialist is a ‘close associate' of Patil.”
Dow had also hired a number of local villagers for construction projects, helped refurbish a local school, expanded water services, and acted on a number of other public works projects that were requested in writing by the local village council — all to no effect.
Mr. Chitkara's version was that Dow had met Mr. Patil several times “to clarify issues.”
However, when The Hindu asked Mr Patil for a response, he characterised the allegations as “101 per cent baseless information.” He said he had opposed the Dow project, which was in his constituency. He also flatly denied he had recommended any PR agency or specialist to Dow: “There is no question of advising Dow on hiring anyone or convincing anyone. I don't know any PR agency and never advised Dow on whom to hire.”
Warkaris meet Pawar
As reported in the press at the time, Warkari leaders had made a representation to Union Minister for Agriculture Sharad Pawar on September 25, only to have their complaints brushed off by the Minister. But when the Warkaris publicly denounced Mr. Pawar and threatened protests against the October 2009 Commonwealth Youth Games in Pune, the senior Union Minister beat a swift retreat.
“Dow representatives” told the Mumbai Consulate officials that Mr. Pawar then instructed Maharashtra Chief Minister Vilasrao Deshmukh to order a halt to the construction and appoint a commission to review the charges. This is what Mr. Deshmukh did.
The commission would be the second to enquire into Dow's Chakan facility; a first commission had already given it a clean chit.
“Dow representatives” further told the Consulate's officials that the Chief Minister also called Andrew Liveris, the global head of the company, “to reassure him about Dow's investments, and said the commission will take two months; Liveris, increasingly frustrated, told Deshmukh that it needs to take less than one month.”
Maharashtra Chief Secretary Johnny Joseph did his bit too. He called Dow (the cable does not say who in Dow) “to express his support but asked for time to defuse the situation.”
Dow CEO Ramesh Ramachandran told Consulate officials (the cable does not specify if they met him with Mr. Chitkara or separately) that the protestors were “seeking a ‘buy-out' but have not ‘ internalised' yet that Dow will not pay.” Mr. Ramachandran said the company was losing $250,000 a month.
The cable said “Dow representatives” (it is not clear if this reference throughout the cable is to Dow officials other than Mr. Ramachandran and Mr. Chitkara) had told Consulate officials that Dow “do not have infinite patience for the political and other problems faced by their business in India.” The company could write off $15-20 million of its investment in the country so far, but feared it would face similar protests and harassment wherever it went, the cable noted.
As it turned out, the second commission cleared the Chakan project. But the protests continued and on September 10, 2010, Dow announced scrapping it. The company returned the land to the Maharashtra government, and said it would scout for an alternative location.
At about the same time its troubles in Chakan intensified in 2008, Dow's troubles with its Gujarat project came to a head. In April that year, Dow Europe GmbH and Gujarat Alkalis and Chemicals Ltd had signed an MoU for a joint venture but unexpectedly, this had to be put on hold.
At his September 25, 2008 meeting with officials of the Mumbai Consulate General, Mr. Chitkara said the investment needed approval from the Foreign Investment Promotion Board (FIPB), which it had expected because both the Gujarat government and the Union Finance Ministry supported the venture.
However, Dow had learnt that the Union Ministry of Chemicals and Fertilisers had put a hold on the project.
“According to Chitkara, however, when agents of Dow met with Union Chemical and Fertilizer Minister Ram Vilas Paswan, he demanded a large sum of money from the company before he would support the project. The company refused to pay and the investment remains on hold.”
Asked by The Hindu about the allegation contained in the cable, Mr. Paswan said it was a “total lie.” He said no one from Dow had even met him to discuss the matter. “If they are saying this, they are lying.”
Mr. Paswan added: “The Dow company and Union Carbide are criminals in my mind and I strongly opposed their plans to establish a presence here. That is why they are trying to tarnish my image. The Commerce Ministry gave clearance for the [Gujarat] project without asking us. Our Ministry opposed this because the case of remediation costs for the Bhopal disaster was still unresolved.”
Dow even took its case to the powerful Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia. He offered them sympathy, “but [he was] unable to overcome this opposition.”
Writing on the wall
The Mumbai Consulate was able to read the writing on the wall.
“Clearly,” its confidential cable observed, “Dow has become an easy target for politicians seeking to exploit the company's situation, especially as state and national elections are just around the corner.”
It commented that Maharashtra was run by “a coalition under a weak and ineffective Chief Minister” and the Dow case had presented to opposition politicians “a combination of issues close to the hearts of their voters: land, environment, livelihood, and religious devotion.”
On the other hand, the Mumbai Consulate concluded, Dow just did not get it.
“In relying on the promises of protection of the state, Dow continues to underestimate the political ramifications of the company's connection to the legacy of Bhopal and Union Carbide.”
But the story does not end here.
The Hindu forwarded two questions to the Dow Chemical Company through its Mumbai office.
The first question related to the privileged information provided by American sources that in September 2008, Mr. Chitkara met U.S. consulate officials in Mumbai and reported that the company had hired the public relations specialist whom Shivajirao Adhalaro Patil, MP, had recommended for $20,000 a month to deal with public protests against the proposed Pune project. So what was the name of the PR specialist and for how many months did Dow retain his or her services?
The second question related to information gained from the same sources that Mr. Chitkara had told them Dow was having trouble get FIPB clearance for an investment in a Gujarat state-owned company. What was the name of that company and was FIPB clearance eventually secured? If so when?
The written response from a Dow spokesperson was this: “Like all global companies, it is common for Dow leaders to meet with government leaders and officials wherever we do business and have plans to grow. It is also common for companies to discuss challenges and opportunities related to investment. This is an important part of doing business in any geography. The questions raised by you pertain to US Government's internal correspondence and should be directed to them.”
It sounded very much like the good old runaround.
(With inputs from Meena Menon and Siddharth Varadarajan)
(This article is a part of the series "The India Cables" based on the US diplomatic cables accessed by The Hindu via Wikileaks.)
(3) Statement by the local NGO issued today in response to the Wikileaks document published in The Hindu newspaper
From: shashi sonawane
Subject: Wikileaks vindicates our stand on Dow Chemicals Pune project. Demand Judicial Enquiry - YUVA BHARAT (Shashi Sonawane)
The Dow chemicals pune project which was burnt down by the Warkaris under the leadership of Banda Tatya Karadkar Maharaj, respected Kirtankar of Maharashtra has also been legally thrown out and the company has withdrawn from the said site.
However, the skeletons of malpractices, corruption and the political manouvreing capabilities of Dow have now been unearthed thanks to Wikileaks !
The latest report published in The Hindu (1st April, 2011) has brought forth the facts which we as agitators were knowing about. The wikileaks has authenticated our information and vindicated our stand.
As you all know, since 16th January, 2008 the agitation against Dow Chemicals so-called R&D project was started by the Shinde Vasuli and surrounding villagers. On that day with the initiative of Lokshasan Andolan, Yuva Bharat, the villagers had formed the "The Bhamchandra Dongar Bachao Warkari Shetkari Sangharsh Samiti" under the leadership of Justice B.G. Kolse-Patil (retd.) and Com. Vilas Sonawane and the construction work was completely brought to halt by the Samiti. On the very same day, Gram Sabha was convened it passed resolution unanimously against the coming up of this project on their village common grazing land.
Since 16th January, 2008 to July 25th, 2008 the samiti spearheaded the agitation. The villagers bravely withstood the police atrocities. Finally on 25th July, 2008, the construction work of the Dow chemicals was completely burnt down and destroyed by the Warkaris under the leadership of Banda Tatya Karadkar.
During this entire agitation, the role of Shiv Sena leader and local Member of Parliament Shri. Shivajirao Adalrao Patil had been suspicious. Apparently he took position against the project under the pretext that the Dow chemicals was not taking people into confidence (read he was not taken into confidence). To increase his nuisance value he had even held 3-4 meetings in the village. Since the role of Shiv Sena for past 40 years has been that of sabotaging peoples' agitations, the villagers did not give any response to him. The villagers did not even attend his meetings !
It is obvious that the authorities and the who's who in the administration were bent upon to speed up the construction fo the project. Of course each carried a price tag. The wikileaks has exposed the well known nexus of the US administration with Dow Chemicals and the Indian administration. Right now we have come to know only about Adalrao Patil's PR price tag of $20,000 per month which he has promptly denied. The wikileaks India cables have also exposed the role Ram vilas Paswan the then Minister for Chemicals and Fertilizers, in connection to this project as well as Dow's Gujarat project. It has also exposed the eagerness of the state govt tosupport Dow. The role of Johny Joseph, the then Chief Secretary of Maharashtra Govt. needs to probed.
Dow chemicals is notorious for its influence over the governments. It has been successful in making its way by pocketing bureacrats and politicians. The wikileaks cables have brought this fact into public domain with reference to India.
We demand independent Judicial enquiry to probe the possible kickbacks, the unwarranted interests shown by Shri. Adalrao Patil, the local Shiv Sena MP and State and Central Administration's undue eagerness to support Dow Chemicals especially the role of Shri. Ram Vilas Paswan, the then Union Minister for Chemicals & Fertilisers and Shri. Johny Joseph, the then Chief Secretary of Maharashtra.