Using one transnational corporation active in the Third World as a case study, assess the extent to which it is accurate to blame TNC’s for the Third World’s environmental problems.



'Come, come mother and sister,

Become unity, roar our united voice.

Send back Indal, Tata, Hydro.

To save Orissa, save Adivasi and Dalit.

The earth is ours, it is our right.’


part of protest song, by Bhogaban Mathi,

Kucheipadar. (Norwatch, 1998)




Currently, there is a surge of interest by transnational corporations (TNC’s) to take advantage of new frontiers made possible since the liberalisation of Indian markets in 1990. Opportunities are facilitated by the Indian government, who are likewise keen to generate foreign exchange, and endeavour to ‘develop’ India into a modern, technologically advanced state, similar to European and American models, along free market principles.

That is not to say India is unindustrialised; since Independence in 1947, a process of rapid industrial development was initiated by Nehru, largely along the lines of Stalinist Russia, which was characterised by state intervention (Gadgil and Guha, 1995). Under this ‘industrialise or perish’ regime (Gadgil and Guha, 1992), it is generally acknowledged that the needs of the rural masses were sidelined, and is amply illustrated in the national forest policy of 1952, which effectively enlarged colonial policies that placed ‘national’ and ‘industrial’ requirements above the subsistence resource needs of rural India, entraining environmental degradation (Gadgil and Guha, 1992, Gadgil and Guha, 1995).

This essay will explore the environmental impact of an industrial project involving TNC’s in Orissa, but first, it may be useful to describe this east Indian state. It is well acknowledged that Orissa is in need of enormous investment (Singh, 1997). Its population is one of the poorest in India; 44% are below the official poverty line, 47% do not have access to electricity, safe drinking water and sanitation. Literacy stands at 49% (Singh, 1997). Orissa also supports one of the largest adivasi (adi = original, vasi = inhabitants) populations of India. According to the 1981 census, about six million indigenous people accounted for over 25% of Orissa’s total population (12% of India’s total adivasi population) (Padhi 1994).

In Orissa, the effects of rapid industrialisation on rural, biomass-based subsistence communities is well documented. Since Independence, several industrial ‘developmental’ projects were initiated, such as the Rourkela steel plant, and various irrigation, dam, and hydro electric schemes (Jena, 1998). These projects were mainly undertaken by nationalised industries, with minimal foreign input. The impact of large industrial projects in adivasi dominated areas was to lead to a highly skewed development, which paid scant consideration to indigenous groups (Das, 1995). Features of these undertakings were large-scale displacement from ancestral lands of adivasi groups (some have been displaced several times, as different schemes have been executed), and characteristically inadequate ‘resettlement and rehabilitation’ schemes (Jena, 1998, Behera, 1996). Das (1998), also reports the loss of self reliance of adivasi families who are displaced by large-scale industrial development, and consequently reduced to ‘living like refugees in ill-planned rehabilitation colonies.’ Environmental degradation, deforestation, and pollution notwithstanding (Das, 1995, Reddy, 1994). Significant, also, is the affect of industrial development to date on the economy of Orissa, which may be described as the ‘capital flight’ effect. Thus, returns from industry and the service sector tended to flow out of the state, and were not invested back into Orissa (Singh, 1997).

Against this backdrop, liberalisation has spurned a rush of interest in Orissa, this time from TNC’s eager to invest in the state’s mineral wealth, which is one of the most bountiful of all India. Table 1 overleaf shows Orissa ranks first in the subcontinent for its reserves in bauxite, chromite, graphite, manganese ore, to name just a few. Most notably, 70% of India’s bauxite reserves, 1.6 billion tonnes, are to be found in the mainly adivasi inhabited uplands of Orissa.



Table 1: Mineral Wealth of Orissa


Reserves(106 tonnes)

% India’s Reserves

Rank in India













Manganese ore




























Iron ore




From Singh, (1997). After Coopers and Lybrand, Prospects for Industrial Development of Orissa, 1996


This essay will explore one of the several large-scale aluminium projects that is scheduled for an adivasi region of Orissa, and involves TNC’s. The case study will be used to highlight trends in the workings of TNC’s in third world countries, with particular reference to environmental degradation. A description of the scheme will be followed by the projected environmental impacts, and possible effects to human health. The response by indigenous people will follow. Lastly, a broader-based discussion, regarding the wider political and economic context of TNC’s operating in third world countries, will be explored. Here, the role of the state, and multilateral institutions will be examined.

The venture to be considered here is actually a consortium of indigenous companies and TNC’s under the name ‘Utkal Aluminium International Limited’. The indigenous companies are Indal and Tata, (prominent Indian companies), while the TNC’s are Alcan, a Montreal-based multinational involved in all aspects of the aluminium industry, and Norsk Hydro, or rather, its subsidiary, Hydro Aluminium, which is actually a part public-owned multinational based in Norway (51% state owned). Norsk Hydro has a diverse portfolio of business interests, including (petro)chemicals, aquaculture, and fossil fuels. Norsk Hydro has the major share in Utkal, with 40%, the other three companies having a 20% stake each.

Utkal plans an extensive ‘greenfield’ alumina project in the Koraput and Rayagada districts of southwest Orissa. Bauxite, the ore from which aluminium is produced, will be mined from the (adivasi) Baphlimali hills, and transported along a 20km conveyorbelt, to the alumina processing plant at Doraguda. The scheme will have an initial one million tonne per annum capacity, but will be quickly increased to 2.5 mt, and is 100% export-oriented. The project demands over 2000 hectares, and necessitates the loss of three whole villages, also land in which twelve villages have legal claims. Numerous other villages will have their access to common resources, such as pasture and water curtailed (Norwatch, 1998). Estimates of people affected by the Utkal project range from 750 (Norsk Hydro), to 3,500 (Utkal International) to 60,000 (Norwegian Agency for Development co-operation).

The environmental impacts of such a mega-industrial scheme are considerable, of course. Although exact figures of projected deforestation are not available, forest loss, particularly of the jungle covered Baphlimali hills, will be significant, in order to mine bauxite ore. An estimated 200mt of bauxite ore is located beneath Baphlimali, which must, by any reckoning, involve considerable loss of forest. Of the projected 2000ha of land necessary for this scheme, deforestation must occur over several hundred hectares, perhaps over a thousand. The effects of deforestation are manifold, and reverberate long after the act of forest removal. Associated impacts of such biomass loss, which may be aggravated due to the hilly terrain, are likely to include an increased likelihood of flash floods, during periods of high rainfall, such as the monsoon, plus an increased likelihood of landslides, due to the loss of water absorbing, and soil binding biomass.

The regional hydrology will likewise be modified, which could include an initial increase in the volume of local streams and rivers, followed by a longer term reduction, or even drying up of local streams and rivers. Deforestation effectively decouples ecosystem processes such as nutrient cycling, which may lead to the nutrient enrichment of water bodies. Eutrophication of water systems is usually due to the increased availability of phosphorous and nitrogen that would otherwise be utilised by biomass such as forest (Begon et al, 1990). Eutrophication usually causes a reduction in biodiversity, but can also kill off the entire ecosystem, if more serious.

Forest loss removes habitat for animals. Creatures found in the forest of Koraput district include bear, jackal, wolf, sambar, spotted deer, but also leopard cat, and the Royal Bengal tiger (Mishra and Dash, 1997). Loss of forest represents a genetic impoverishment, and a reduction in biomass resources for local communities, particularly pertinent, given the critical role of forests to adivasis, such as the Gonds who characteristically inhabit the uplands (Mishra and Dash, 1997). The knock on effects of using a diminishing resource base is to increase pressure on the remaining forests, thus, potentially intensifying and hastening localised degradation.

Environmental degradation due to the Utkal project will be entrained on the landscape of Koraput and Rayagada due to various processes associated with aluminium production. Bauxite extraction of the 200 million tonne reserves beneath the Baphlimali hills (Financial Times, 16 May 1998) will transform the uplands into a mining landscape, with the additional burden of activity large-scale extraction entails, not to mention particulate pollution.

The process of aluminium smelting is very energy intensive; the production of one tonne of aluminium necessitates 14-18 kilowatt-hours of electricity. The Utkal project will be powered from the states reserves of low grade coal, which increases the environmental impact of its use. To meet the scheduled production of aluminium, coal enough to power approximately 16 million kilowatt hours, rising to 40m Kwh, will be required. However, as India’s coal has a high ash component (International Coal Report, 1994), it must be washed, to increase its quality, which is water and waste intensive. Further, India’s coal has a low calorific value (International Coal Report, 1994), so that more coal must be combusted per unit of fuel produced, thus requiring a greater ‘turnover’.

The new mines supplying Utkal will undoubtedly be opencast, due to the low quality of the coal, and consistent with a current trend, which facilitates an increase in coal production, allowing a quick return on investments (Sengupta, 1998). However, it is also acknowledged that opencast mines displace more people, and have an increased adverse environmental impact than below ground mines (Sengupta, 1998). Total area affected is ‘manyfold’ the opencastable area, once related activities are taken into account (Choudhary and Prabhakaran, 1995). Choudhary and Prabhakaran (1995), of the Central Mine Planning and Design Institute also point out that the rehabilitation of opencast mines once extraction has ceased can be problematic. In some coalfields in Orissa, ‘the impact has been so severe, ... that it is very difficult now to restore a healthy environment and landscape.’

Emissions to the air and terrestrial and aquatic environment, will result from Utkal’s mega smelting operations. Polycyclic aromatic hydrocarbons (PAH’s), perfluorocarbons (PFC’s), along with dust and fluoride (Alcan, 1999), will accompany sulphur dioxide (SO2), from the large-scale coal combustion, in reducing the air quality of Koraput and Rayagada districts. Indeed, the World Bank has relaxed its own guidelines regarding SO2 emissions to facilitate Utkal and other industrial undertakings in Orissa that will likewise be coal-powered (Wysham, 1996).

Solid effluents will be considerable, due to the characteristic red mud generated from bauxite processing, which will need to be held in large holding ponds (Das, 1995).Water effluents include PAH’s, and fluoride discharges (Alcan, 1999). Fluoride effluent is thought to be responsible for the debilitating and chronic disease, fluorosis, already noted in Orissa, in some populations close to areas of aluminium production (Samal and Naik, 1990). However, the issue is more complex, as fluorosis is also implicated in the consumption of contaminated water as a result of local geological activity; the weathering of granite (Pearce, 1998).

Altogether then, the impacts of the Utkal project highlighted so far, will significantly and detrimentally modify the landscape of southwest Orissa. It would not be an unreasonable assumption that given the impact of the Utkal project, considerable environmental degradation may ensue, particularly at the regional scale.

Certainly, affected local communities have been vocal in their opposition to the mega scheme, concerned with their loss of resources, and issues of environmental degradation, which have also been taken up by grassroots non-governmental organisations (NGO’s). The support of local NGO’s has given weight to local protest, and provided a channel of communication through which a normally voiceless community has been represented and heard. Not surprisingly, local NGO’s have been variously charged with ‘agitation’, being ‘anti-industrial’ (Norsk Hydro, 1999), reported in the business media as ‘sustaining an environmental campaign’ to thwart industrial development (Financial Times, 25 March 1998), and more recently have been threatened with de-registration and the withdrawal of funds by the state government, who accuse them of inciting violence. The situation has been brought to the attention of Amnesty International, who released a press statement (8 Feb, 1999), expressing ‘concern about wider moves to restrict freedom of association or NGO activity.’ NGO’s from other countries also, notably several from Norway oppose Norsk Hydro’s involvement in Utkal, and have been monitoring the situation (Leer-Salvesen, 1998).

From the description given above, it seems that the Utkal project is not only unsustainable, but contrary to social justice. It may be instructive briefly to outline the agenda of a TNC, using the example of the Utkal consortium. This will lead on to how TNC’s operate within a broader, political and economic arena.

Alcan’s president has been quoted saying that ‘the Utkal project promises to be the world’s lowest cost alumina plant.’ (The Hindu, 30 April, 1998). The production of aluminium has been estimated at $87 per tonne (The Statesman, 21 May, 1998). It is worth exploring how this is achieved. The TNC agenda, like most businesses operating within a global capitalist system, is to maximise profits. To pursue this goal, TNC’s strive to minimise costs, which can involve practices which are becoming increasingly common to TNC’s. Locating in the Third World may be one such practice. In this way, costs may be minimised, by an abundance of cheap labour and cheap, plentiful resources, (or the commodification of humans and nature as Parajuli (1998) may describe it), and where environmental management and regulations may be more relaxed than so called First World countries. Costs may thus be minimised also by less stringent monitoring, and perhaps smaller fines for environmental transgressions, such as large emissions or discharge events. Useful for companies with bad environmental management histories, such as Alcan (Michael Jantzi, 1995). In this way, costs are externalised (IUCN/WWF, 1999), and the environmental impacts, usually detrimental, are not taken into account economically, contributing to a discounted product or service, but are disproportionately borne by local communities who have lost, or had access to their resources curtailed (Gadgil and Guha, 1995). Thus Norsk Hydro, Alcan et al, are achieving the most competitive aluminium in the world, as the sum product of considerable control over the project design, e.g. being able to site the processing plant near to the mines, a plentiful resource base, in terms of labour; a large uprooted community that will be seeking employment, and materials; abundant bauxite and low grade coal, again, in close proximity to the industrial plant.

In order to fully answer the question to what extent are TNC’s to blame for environmental problems in the Third World, it would be useful to look at how TNC’s operate within a broader political and economic realm. It has been shown that on the ground, TNC’s, such as Alcan, Norsk Hydro etc. can implement industrial activity that is environmentally detrimental, and can entrain degradation that may outlast the industry that augmented it. The gains to the state seem intangible, however, when the destination of Utkal aluminium is considered. The final product will feed the growing demand for light metals in cars, particularly in the American, but also the Asian markets, and will flow not just out of Orissa, but out of the subcontinent, amplifying the ‘capital flight’ effect, discussed earlier. To the extent that the state is complicit in this arrangement needs investigation.

As Bryant and Bailey (1997) note, it is not uncommon for Third World states to ‘woo’ TNC’s, as part of the drive for rapid economic development. Regarding Orissa, the state government is offering significant inducements, such as tax concessions, and investment subsidies to TNC’s, (and big indigenous business concerns). Several parts of Orissa considered as ‘backward areas’ are singled out for priority investment by the federal government, who are offering special tax concessions (Singh, 1997), of which Koraput and Rayagada districts are included. Such incentives will therefore benefit the Utkal project and contribute to the discounted price of the aluminium produced. State complicity is therefore evident in encouraging TNC’s to undertake environmentally degrading operations, reflecting a policy common to many Third World states (Bryant and Bailey, 1997).

Third World States then, illustrated here by India, appear to be willing accomplices in the environmental degradation initiated by TNC’s, and for little material gain. However, the issue is rendered more complex, when an international arena of politics and economics is considered. Political ecologists have commented that the large-scale technocentric developments mushrooming in areas such as Orissa are symptomatic of a particular development trajectory (Bryant and Bailey, 1997), and represent the hegemony of neo-liberalism in international policy (Peet and Watts, 1996). Of particular significance here, is the role of multilateral institutions, such as the World Bank and the International Monetary Fund. These institutions, along with other technical institutions were primarily created ‘to promote social and economic development through the provision of technical and financial assistance’, and have been a critical feature in the advancement of the global capitalist economy (Bryant and Bailey, 1997).

In recent years, multilateral institutions have shifted their focus from the First World, to the Third. For struggling countries wanting to develop their economy, the World Bank and IMF provide loans, conditional to certain structural adjustments. These international financial institutions (IFI’s) promote neo-liberal free market policies, such as privatisation, and the reduced role of the state, trade liberalisation, deregulation of major sectors of the economy, etc.. Structural adjustments effectively dismantle trade barriers which open up Third World economies to large business concerns such as TNC’s, Alcan and Norsk Hydro in Orissa being one such example. Despite the World Bank’s apparent remit of poverty alleviation and now ‘sustainable development’, it is acknowledged that the structural adjustment measures made conditional by these IFI’s lead to increased poverty and economic inequality, social disruption and environmental degradation (FOE, 1999, Bryant and Bailey, 1997). While the major beneficiaries are TNC’s and G-7 countries, the major investors in the World Bank.

In Orissa, structural adjustments made at the behest of the World Bank are transforming this ‘under-developed’ state into an ‘investor’s paradise’, where export is the main goal (Singh, 1997). Privatisation of the energy sector, coupled with the devaluation of the Rupee, central government earmarking Orissa as a priority investment area, particularly for heavy industry, and the considerable subsidies and incentives, is creating a surge of interest, particularly from TNC’s in the mineral wealth of Orissa. The Utkal project described here is just one of several mega-industrial undertakings to be planned for the Koraput and Rayagada districts alone.

Ominously, social developmental matters are not just in the hands of the Indian government, but are now in the corporate realm, with the Utkal partners declaring an intention to develop the whole area. In an expression of philanthropic corporatism, and reminiscent of the discourse of colonialism, Ivar Oellingrath of Norsk Hydro, launching a policy document ‘Corporate Social Responsibilities Guidelines’, comments ‘Natural resources in the area have already been stretched to the utmost. If the land continues to be farmed in the way it is today, the soil will be further depleted. Controlled industrial development will be the best thing for the area.’ (Norsk Hydro, 1998). Loss of resources for some of the displaced people, will accompany loss of social and economic autonomy, as the corporate realm paternally ‘adopts’ them. For others, who may have some form of land compensation, the quote from Blaikie and Brookfield (1987), seems particularly apt: ‘land degradation is both a result and a cause of social marginalisation.’

This essay has attempted to show that regarding Orissa, environmental degradation was not initiated necessarily by TNC’s, but their relative recent arrival represents the latest external player to claim the states resources, after colonialism and indigenous industry, to the considerable detriment of local communities, in this case, one of the marginalised of all groups in the subcontinent, adivasis. TNC’s then, may entrain environmental degradation on the ground, through technocentric, capital intensive industrial developments, but the role of the state, and multilateral institutions, provide a political and economic framework, within which economies and societies are being restructured and reorganised as part of the global expansion of capitalism.







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