Inclusive growth, the CSR way

Prime minister Manmohan Singh asserted a few years ago that inclusive economic development was a national goal. To his credit, a number of government programmes have since been initiated that imbibe the spirit of inclusiveness - the most popular among them being the National Rural Employment Guarantee Scheme. What is interesting, however, is to see the corporate social responsibility voluntary guidelines coming out of the ministry of corporate affairs in December 2009. To quote Salman Khurshid, minister of state for corporate affairs "... the corporate sector is also standing in the midst of a sustainability crisis that poses a threat to the very existence of business. What we have before us is a crossroad where one path leads us to inclusive growth and the other may lead to an unsustainable future. ... the business sector also needs to take the responsibility of exhibiting socially responsible business practices that ensure the distribution of wealth and well-being of the communities in which the business operates." This is indeed a very commendable approach.

On the other hand, we have a rapidly evolving set of public-private partnership models wherein the government is assuming onto itself the responsibility of the vexed process of land acquisition and environmental clearances so as to attract large scale investments into a range of sectors. In the process, corporate entities have been provided with an escape route wherein they can wash their hands off the process of land acquisition and the resettlement and rehabilitation of people affected by these projects. Where does that leave the people affected by such projects? Can they ever be assured of a reasonable compensation? Mamta Banerjee has been credited with singlehandedly nixing the land acquisition bill objecting to even 30 per cent of the land acquisition needed for a project being facilitated by the government. Her stance is that private promoters should acquire 100 per cent of the land needed for a project.

The Posco project in Orissa is one of the high profile projects, which faces this responsibility trap. Posco, a South Korean company, is interested in setting up a large integrated steel plant that requires acquisition of 4,000 acres and involves displacement of an estimated 2,000 families. Irrespective of whose responsibility land acquisition was, or of the extent of encroachment that may exist on the land, the reality is that Posco has committed time and effort and some investments into the project. It is today five years behind schedule on the project. Given the project investment cost of Rs 55,000 crore, back-of-the-envelope calculations would yield an opportunity cost of a one year delay in project implementation, assuming a modest return on investment of 10 per cent, to be about

Rs 5,500 crore. This single year opportunity cost would be a few hundred times larger than the cost the company would have to incur for a one-time reasonable settlement with the affected families. What prevents companies from taking a longer-term holistic perspective on the issue?

What is also obvious from a review of such cases is the huge trust deficit that exists between project-affected people and companies and, unfortunately, also the local administration. What should be the role of the government, at its various levels, in the cases of land acquisition? Should the local government (district administration) be mandated to be primarily and exclusively responsible for the welfare of local communities, while the state and national governments push for investments so essential for development? Should the resettlement and rehabilitation policies of the various state governments be clearly recognised as the minimum guidelines to protect societal interests? Who, under the corporate affairs ministry’s CSR norms, would be responsible for ensuring that companies do "not engage in business practices that are abusive, unfair, corrupt or anti-competitive"?

While these tangles are being resolved, the voluntary CSR guidelines seem to apply largely to post-establishment activities of a company. CSR as it is practiced today defines our understanding of the concept. But why should resettlement and rehabilitation activities not form part of CSR? How do we coordinate across the various ministries dealing with these inter-linked subjects to get a coordinated approach to inclusive development as it revolves around the corporate sector?

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