By Krittivas Mukherjee

NEW DELHI, Aug 25 (Reuters) - India's decision to reject
UK-based Vedanta's plans to mine bauxite points to tighter
enforcement of environment laws, a commitment to playing by the
rules rather than a political campaign against
mega-corporations.

In a landmark decision on Tuesday, the environment ministry
blocked Vedanta's mining project in eastern Orissa state
because the forest-hills it would have destroyed are
intertwined with the lives and livelihoods of local primitive
tribes.

It was a stunning victory for a four-year-long global
campaign for the Dongria Kondh tribe against a giant mining
firm that has been pitchforked into India's debate over
environmental laws.

It also infused life into the environment ministry with its
maverick minister, Jairam Ramesh, whose tussle with his cabinet
colleagues on clearing forests for mining and roads underlines
India's struggle for sustainable growth.

"What Jairam Ramesh is doing is saying if you have to do
business here play it by the rule, no sidetracking environment,
no backdoor, which is a good thing," said R.K. Gupta, managing
director of Taurus Mutual Fund.
"The clear signal to overseas investors is that you can not
take environmental clearance for granted. Things will not be
done as they used to be in the past. This is course
correction."

Commentators point out that thousands of factories get
built in India every year and the government has clearly
encouraged industrial projects - evidence analysts say that the
ruling Congress party is not anti-development.

HERO OR VILLAIN?

Ramesh's stand in a country focused on development and
raring to take the global high table has meant he is also
scoffed at by some as an inflexible "green fundamentalist".

For years, the environmental ministry was seen as
rubber-stamping projects. But Ramesh has scrapped or delayed
clearance for some 100 mining projects, including those backed
by South Korea's POSCO, drawing protests that he is hurting
development in a nation short of power and raw materials.

A second airport in Mumbai is caught in the environment
debate as are dozens of road and dam projects.

Ramesh has also cracked down on illegal mining, often done
with help from local politicians, and brought more
accountability in a sector that had minimal environmental
regulations.

Underlying all this is a realisation in India that
enforcing environmental rules does not have to hurt growth, can
boost the idea of a rule of law and make government policies
transparent.

"This not a problem typical to India, it is a developing
country phenomenon; Brazil has realised, Australia faced this."
said Paranjoy Guha Thakurta, an independent political
economist.

Government sources say POSCO could be given permission for
its $12 billion steel mill in Orissa in 2 months because its
problems were not quite the same as Vedanta's.

POLITICAL DIVIDEND

Mining lobbies have accused Ramesh of witch-hunting
multinational corporations, saying he is going after projects
in states not controlled by the Congress ruling party.

Orissa is one of these non-Congress states and its chief
minister, Naveen Patnaik reacted to the scrapping of the
Vedanta project by saying: "I hope there was no politics
(involved)."

And as if anticipating such charges, Ramesh, while
rejecting the proposal on Tuesday, said: "There is no emotion,
no politics, no prejudice ... I have taken the decision in a
purely legal approach. That these laws are being violated."

But in India, saving the environment is a political issue.

Years of uncontrolled mining has pushed tribal people off
their forest land, alienating them and fuelling insurgencies
that feed off a perceived neglect of the poor.

In India, two-thirds of the population makes a living from
farming and a growing Maoist rebellion has capitalised on a
wider resentment over the government's seizure of land for
industry.

So, Ramesh's tough stand on environment could also help his
ruling Congress party reap political dividends by restoring the
lost support of millions of tribespeople.

And in pursuing his environment policies, Ramesh's hand is
probably strengthened by support from his Congress party chief
Sonia Gandhi. He was close to her husband Rajiv, a former prime
minister, who was instrumental in bringing Ramesh into
politics.

The 56 year-old minister, a sprightly new kid on the block
by the standards of India's grandfatherly politicians, is
pushing a reformist agenda against more traditional figures
within the government who have often focused more on political
expediency.

When Prime Minister Manmohan Singh appointed him
environment minister last year, months ahead of the Copenhagen
climate conference, Ramesh created a flutter by suggesting that
India could be more flexible in its negotiating stance at the
Copenhagen summit. He soon backed down, and even seemed
contrite.

"In our country, you are not accepted if you start thinking
out of the box," Ramesh, a former U.S.-educated civil servant,
said after the controversy.

"You have to be inside the box. You can go out of the box
occasionally but be sure you return quickly."
(Editing by Alistair Scrutton and Miral Fahmy)