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Law ministry shows thumbs down to Dow

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Last updated on: May 13, 2008 03:32 IST

Dow Chemicals, which has been insisting that it was not liable to clean up the toxic dirt left by its Indian subsidiary Union Carbide, does not seem to have any support for its position from the Union law ministry.

An internal note obtained by activists from the Prime Minister's Office and dated February 2 this year says that the Ministry of Law believes that 'irrespective of the manner in which Union Carbide has merged or has been acquired by Dow, if there is any legal liability it would have to be borne by Dow Chemicals.'

The note also puts a question mark on the prospects for future investments by US-based Dow in India.

The note referring to comments of the law ministry in a Cabinet note prepared by the department of chemicals on Dow's legal liabilities in Bhopal says: "It has categorically stated that in view of the pendency of the writ petition in Madhya Pradesh High Court and the legal position stated above, it cannot be said that the investment proposed to be made by Dow Chemicals will be immune from the orders of the court."

This is with reference to the proposal of Dow Chemicals to invest $1 billion in India. This document contradicts Dow's stated position to its shareholders, and clearly outlines the risks faced by Dow Chemical's investments in India.

The document was unearthed on May 8, 2008, through Right to Information from the PMO by survivors organisations of 1984 Union Carbide disaster in Bhopal.

In 2005, Dow began intense lobbying for legal immunity against Carbide's liabilities prompted by a May 2005 application by the Ministry of Chemicals in a case relating to toxic waste clean-up in the Madhya Pradesh High Court.

The application sought Rs 100 crore ($25 million) from Dow towards clean-up costs. Dow claims that its 100 per cent subsidiary, Union Carbide, is a separate legal entity with its own system of liability management, and that Dow has inherited only assets and not Carbide's liabilities.

Responding to requests from Dow and its allies, the prime minister instructed the chemicals ministry to prepare a note on Dow's legal liabilities in consultation with the law ministry.

While the actual note prepared by chemical and law ministries is not available, the internal briefing note prepared by PMO director Shaleen Kabra dismisses any possibility for immunity.

Bhopal activists said they will bring the law ministry's opinion to the notice of Dow shareholders at the company's annual general meeting at Midland, Michigan, on May 15. The company is keeping its shareholders in the dark about its business in India, said Rachna Dhingra of the International Campaign for Justice in Bhopal, an organisation which has been protesting in Delhi since last month seeking justice for victims of the 1984 Bhopal tragedy.

Giving a background for the preparation of the Cabinet note mentioned above, the note marked 'internal' says: Department of chemicals and petrochemicals sent a Cabinet note on legal liabilities of Dow Chemicals for environmental remediation of plant site.

The matter was referred to the department on the basis of deliberations of Trade and Economic Relations Committee in the PMO in which it was noted that Dow Chemicals was proposing an investment of $1 billion in India and was seeking an assurance from India that their executives should be able to visit India freely to take care of their business interests.

Referring to these, the note says: At the same time, the ministry has mentioned that the company's executives have been moving around in the country freely and taking care of their business interests.

According to the note, the department of chemicals has suggested that the orders of the high court be awaited since the matter is sub-judice.

A Dow India spokesperson, when asked to comment, said reaction was awaited from the main Dow Chemicals office in the US.

The note obtained from the PMO has comments from Prime Minister Manmohan Singh saying that while his office need not give any comments on the Cabinet note, it should be sent to industry ministry, finance ministry and Planning Commission for their comments.

Commerce Minister Kamal Nath, Finance Minister P Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia had earlier written letters to the PMO recommending the case of Dow Chemicals for consideration with reference to its legal liabilities in the Bhopal case.

"The Industry and Finance Ministers and Planning Commission's Montek Singh Ahluwalia are the ones to watch out because they endorsed Dow's demand for immunity in 2006," said Satinath Sarangi of Bhopal Group for Information and Action.

The revelations could have ramifications on the joint venture agreement between Dow Chemicals and Gujarat Alkalies and Chemicals Ltd last April to set up a 200,000-tonnes-per-annum chloromethanes factory in Dahej, Gujarat.

This is Dow's first major investment announcement since its acquisition of Carbide. Dow has shied away from large investments in India, both because of its perceived risks and the hostile reaction to its entry from various quarters.

In January this year, Dow Chemical's attempts to construct a Rs 300-crore R&D facility in Chakan, Pune, was stalled after villagers dug up approach roads to the construction site. The villagers have forced the government to rethink the permission given for Dow's proposal, says Sarangi.

Meanwhile, Dow's attempts to forge alliances with the Indian Institutes of Technology have also run into rough weather. Citing Dow's mishandling of the Bhopal issues as a reason, students and teachers at six prestigious engineering institutes around the country have joined hands to bar the company from any truck with IIT.

Responding to queries, Dow Chemicals spokesperson Scot Wheeler recently told to Business Standard that the company was excited about doing business in India while maintaining that the Carbide site was owned and maintained by the state government and it was responsible for cleaning it.
Sreelatha Menon in New Delhi