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Vedanta Undermines Indian Communities

by Nityanand JayaramanSpecial to Corpwatch
November 15th, 2005

cartoon by Khalil Bendib

A tribal temple on Shervaroyan Peak in the hills of Yercaud in Southern India recently developed several large cracks. Built several centuries ago, the temple has withstood colonization and independence. But of late, a new mine threatens to destroy this historic site. Vedanta, a fast-growing British company, owns a subsidiary – Madras Aluminium Company Limited (MALCO) – that has been strip mining this and nearby peaks for bauxite, the ore that yields aluminium used in products from throwaway soda cans to aircraft bodies.

From where he stands, K. Babu can see the deep red gashes ripped into the hillside barely 100 metres from the temple. He and other community activists charge that MALCO is a heavy weight player in the local economy and politics, and a significant contributor to environmental degradation. “There’s a limit to exploitation. Nothing is sacred any more,” says the president of the local youth federation. “Their only botheration is to excavate more and more. Maintaining ecology is not at all an issue.”


MALCO’s operations in the southern Indian stat e of Tamilnadu span more than 60 kilometres– from the mist-clad Yercaud and Kolli hills to the impressive earthen dam and reservoir on the Kaveri River in Mettur. On the banks of the huge reservoir, MALCO operates a smelter and a refinery complex where locally mined bauxite is converted into aluminium. A mountain of toxic red mud – a by-product of aluminum production – is separated from the reservoir by a flimsy embankment.

MALCO is a small cog in the giant wheel that is Vedanta Resources, a company set up by British billionaire businessman Anil Agarwal. Born in eastern India, he started out as a scrap metal merchant in Mumbai, before moving to London 30 years ago. Agarwal’s fortunes soared as the small Indian company he set up in 1988 rode the telecom boom, supplying copper cables to telecom companies in India.

Vedanta in India

Sterlite Industries India Ltd and Vedanta Alumina Ltd are Vedanta’s two most significant businesses in India. Vedanta group’s Indian subsidiaries include:

1. Sterlite Industries India Ltd: Copper business. 80 percent holding
2. MALCO Ltd: Aluminium business. 80 percent holding
3. Vedanta Alumina Ltd: Alumina business. 94 percent holding between SIIL and Vedanta Resources plc.
4. Hindustan Zinc Ltd: Zinc business. 52 percent held by SIIL.
5. Bharat Aluminium Co. Ltd: Aluminium business. 41 percent held by SIIL

Source: Annual Report 2005. Vedanta Resources plc.

Today, Vedanta is a vertically- integrated behemoth with an impressive international portfolio comprising copper, bauxite (aluminium), zinc, lead and gold. It has raised almost $1 billion on the London Stock Exchange and has started to snap up mines in Zambia and Australia.

In India, which remains its production base, the company runs a giant copper smelter in the coastal town of Tuticorin in the southern state of Tamil Nadu, and aluminium smelters in the central and east Indian states of Chattisgarh and Orissa. According to the company’s annual report, it plans to start a massive captive mine in the Niyamagiri hills of Orissa, a smelter in nearby Lanjigarh, and a refinery also in Orissa.

According to activists, the projects threaten densely forested areas that are home to tiger, Indian bison, bear, and elephant. The affected human population includes impoverished tribal communities, some of whom charge that Vedanta’s projects are illegal, and that the state and central governments are colluding with the company to circumvent environmental protections.

“Nobody wants to take on Sterlite. They have built entire plants within their copper complex [in Tuticorin] with no permission from any of the authorities and without fear of reprisal," says Fatima Babu, a women’s activist and fisher leader from Tuticorin. "The government machinery has not just tolerated Sterlite’s violations but facilitated it.”

Faced with community opposition, Sterlite has set up a foundation to address local needs and sited seven of its 18 centers in Tuticorin, Sterlite Copper’s hometown . "We don't do anything extraordinary," S. Chaamundi, country head of the foundation’s child welfare program told India’s Financial Express. "But the glow in the eyes of the children when they feel that they have someone to bother about them, the shine in the face of the poor parents when they report their child also say 'sorry' and 'thank you,' like the children in the homes they work as housemaids or coolies, make us feel we are doing something worthwhile."

Bombay Billionaire’s Woes

Despite his high level connections, Agarwal has fallen afoul of the law in both Britain and in India where he was accused of collaborating with the infamous stock-
market scamster Harshad Mehta. Known as “Big Bull" Mehta was notorious for insider trading and manipulating stock prices.” In 1998 while the Bombay Stock Exchange was performing poorly and Mehta was promoting Sterlite stock, the company’s shares rose by 41 percent. That same year, the Securities Exchange Board of India (SEBI) "prohibited [Sterlite] from accessing the capital market for a period of two years," for insider trading and other offenses. A subsequent exoneration of Sterlite by the Securities Appellate Tribunal’s left many questions unanswered.

In the UK in 2000, the London Employment Tribunal awarded $1.2 million in damages to an executive whom Agarwal had harassed for refusing to falsify a presentation for a U.S. offering. According to the tribunal, Agarwal threw his digital diary at the executive, and thundered: “You have not seen my negative side, and I will make sure that you do not have a place on this planet.” In the March 2004 Billionaires, Michael Freedman reported Agarwal responding that "with 13,000 employees some grievances are inevitable."

Faced with mandatory disclosures and scrutiny, the company is seeking to delist itself from the Bombay Stock Exchange and transfer its Indian holdings to the UK. “This was the first Indian mining outfit to have a primary listing [in London]," Freedman reported, "and the City needed to be satisfied that the assets Agarwal claimed truly existed and his governance standards measured up. A team of 120 lawyers, bankers and engineers went to India to verify titles and pore over the books.”

The controversies surrounding Vedanta’s assets in India don’t seem to have dampened the spirits of the London financial world. Like Agarwal, most of them seem content to wait patiently for things to “come through.

 

Telling Tales from Tuticorin

These social welfare programs have done little to blunt a long history of opposition to Vedanta or to counter evidence that it has polluted the environment, poisoned locals, and colluded with officials to bypass environmental protections.

In less than 8 years, 139 people have been injured and 13 killed by accidents or pollution from the Tuticorin smelter complex, according to documented reports and testimony from workers. [See box on “Occupational Injuries and Deaths at Sterlite”]

Complaints about the company began mounting in the mid-1990s, when protesters in Ratnagiri in the western state of Maharashtra cited environmental concerns to block Sterlite from building a smelter and to force the state to revoke the company’s license. Shortly after, a Tamil Nadu government invitation to Sterlite to build a plant in Tuticorin sparked massive protests by residents -- particularly fisherfolk.

But the Tamil Nadu project had the blessing of Chief Minister J. Jayalalithaa Jayaram, who laid the foundation stone for the complex. Less than four months after applying to build the smelter, Tamilnadu Pollution Control Board (TNPCB) granted conditional licenses to construct a 140,000 ton-a-year copper smelter and associated plants.

That license stipulated that the unit be at least 25 kilometres from the Gulf of Mannar Marine National Park in order to protect the region’s ecology – its famed coral islands and exotic species such as dugongs, sea turtles, and pearl oysters -- from sulphur dioxide, arsenic and lead emissions.

In 1995, ignoring the TNPCB’s instructions, Sterlite erected the smelter complex– including a mothballed smelter scavenged from the U.S.– 16 kilometres from one of the protected islands. Rather than act on the violation, the pollution board granted the company an operating license to manufacture up to 40,000 tons of blister copper.

In 1996, local resistance came to a head when fisherfolk used an armada of small boats to prevent ships carrying Sterlite’s raw material – copper concentrate – from entering the Tuticorin harbour. But resistance waned after the government conceded to one of the protesters’ demands: to prohibit disposing the effluents at sea.

Within two years a spate of accidents and gas leaks from the factory spurred the Madras High Court to commission a report on pollution by Sterlite. NEERI – a national environmental engineering laboratory – faulted the company for discharging dangerous levels of pollution into the environment and recommended the company’s closure. Barely three months later, the same court reversed itself, cleared Sterlite, and recommended its reopening.

Occupational Injuries and Deaths at Sterlite.

Sterlite denies that many of the incidents described below (gathered from community sources) were caused by the company.

Date– Description of Injury/Fatality

1997– Killed: Explosion at the plant. 2 persons reduced to charred bone; 2 workers maimed. July 1997– Injured: Toxic gas leak from Sterlite. 120 people exposed. 45 (42 women and 3 men) hospitalized. Incident reported by women workers at a neighboring cut-flowers factory.

(Agarwal told the media: "The incident has nothing do with our factory and there was no leakage of any kind of gas from our plant.")

August 1997– Exposed: Workers at nearby Tamilnadu Electricity Board substation suffer headache, coughing and choking due to smoke emanating from Sterlite.

August 1997– Killed: Two contract workers killed, one injured.

April 1998– Killed: Two employees killed, four injured.

March 1999– Injured: Sterlite Gas Leak – 9 employees of “All India Radio” hospitalised

September 2000– Injured: Two workers sustain acid burn injuries.

November 2000– Sterlite pumps toxic effluents into village pond. Villagers detain factory employees.

July 2001– Killed: Worker trapped under Gypsum load.

August 2003– Killed: Lorry cleaner killed during loading

August 2003– Killed: Lorry cleaner killed while loading Rock Phosphate

December 2003– Killed: Welder succumbs to a fall

2003– Killed: Electrician killed. Another worker injured.

May 2004– Killed: Worker dies after fall from lorry

September 2004– Killed: Contract worker run over by crane

Source: Sterlite workers and ex-workers, 2005.

Then, weeks after the facility re-opened, nine employees of a neighbouring radio station who were hospitalized, blamed a gas leak at the factory.

By September 2004, when a Monitoring Committee (SCMC) empowered by the Supreme Court visited Sterlite, the plant was churning out four times the allowed levels of pollutants, according to the Vedanta’s Annual Report 2004.

In the face of this record, some environmental and human rights activists are confident that local resistance will gain strength. “The [anti-Sterlite] campaign is bound to pick up because of [Agarwal’s] arrogant expansionism,” says T.S.S. Mani of Human Rights Tamilnadu Initiative, a Chennai-based voluntary organisation.

Other activists remain sceptical.
“I don’t know how we are going to succeed given the level of [government] collusion,” Fatima Babu says. “Even now, they are going ahead with illegal expansions and business as usual.”

That cynicism is fueled by the fact that all the new construction in Tuticorin has occured without the environmental clearances legally required by both the central and state governments,
and that other illegal construction at the Orissa site continues. At the time of the Supreme Court monitoring committee’s 2004 visit to Tuticorin, Sterlite had nearly completed construction of a 300,000 ton-per-year copper smelter, a 127,000 ton copper refinery, a power plant, and several other units. None had government approval.

Nonetheless, barely a day after the committee’s visit, the central government gave post-facto clearance to the already constructed plants – despite the fact that Sterlite had never gotten the pollution board’s consent to built them. The board approval came in April 2005 when the factory was ready for production. According to a July 2005 Supreme Court Committee report the TNPCB claimed that it consented afterthe Central Ministry ordering it to do so.

Senior TNPCB officials declined to comment. “I’ll get into trouble if I speak to you. Please don’t ask me anything,” said R. Ramachandran, member secretary (acting) of the board. A faxed letter seeking clarification on the reasons for TNPCB’s failure to force compliance, elicited a cryptic response from Surjeet K. Choudhary, secretary to the Tamilnadu government and temporary board chairman. “Board is taking necessary action,” he wrote.

Phone calls and emails to Secretary to the Union Environment Ministry Prodipto Ghosh and to public relations chief Maria Doss went unanswered.

Deforestation and Evictions

The controversies have apparently not affected the company’s bottom line. The man behind Vedanta/Sterlite, Anil Agarwal, reported that attributable profits for year ending in March 2005 were up 66 percent to $120 million."This has been an exceptional period for metal prices driven by strong demand from China," as well as for "increased foreign investment and the potential [for India] to become a major regional manufacturing hub," he said in Vedanta’s annual report. Agarwal acknowledged that the company had benefitted from the political climate. The Congress Party, elected in May 2004, "has maintained a policy of growth and liberalization" favorable to his company, he reported.

That growth is in no small part a consequence of Agarwal’s ability to work the system. India’s commerce minister P. Chidambaram was on the Vedanta board until his party assumed power in New Delhi last year. His replacement, 70-year old Naresh Chandra, is a former cabinet secretary and senior advisor to the prime minister of India from 1992 to 1995, and Indian ambassador to the US from 1996 to 2001.

A cartoon in Business India depicts the Vedanta/Sterlite founder squeezing himself through an hour-glass saying “In India, you must have patience. Everything will come through.” Many concede that the London-based billionaire’s understanding of India’s decision-makers is frighteningly accurate.

Ritwick Dutta, a Supreme Court lawyer who has brought Vedanta’s violations in Orissa to court, says that the company adopts a time-tested strategy: “They don’t go for small violations. They go in for massive violations, bring it to light and then get post-facto clearance after payment of an insignificant fine. In Orissa, they chopped down trees on 58 hectares, and gladly paid the fine of Rs. 30,000 or so ($650). Now, they have gone ahead and clear-felled another 1,000 hectares of forests in Chattisgarh.”

On September 21, another Supreme Court monitoring committee, this time the Central Empowered Committee (CEC) on Forests, recommended revoking Vedanta Alumina Ltd’s environmental clearance for a 1 million ton aluminium refinery in Lanjigarh, Orissa. The CEC found that Vedanta had falsified information, destroyed 58 hectares of forest land and begun construction without the required clearances.

“The refinery’s viability is dependent on mining the nearby Niyamagiri hills which are in a reserve forest. But the company failed to disclose this while seeking permission for the refinery,” says Dutta. “Their strategy is to quickly invest money and build the refinery and then plead with the authorities that their investment – nearly Rs. 3500 crores ($780 million) would be rendered unviable if the mine is not cleared.” The Lanjigarh plant is nearing completion, while the mining proposal has yet to secure approval.

Company head Agarwal brushed aside these concerns in his annual report. "There have been some public interest submissions to a Supreme Court of India sub-committee, regarding the environmental clearances for the bauxite mining and these are currently being addressed.

Some activists suspect that the ways the company is addressing the problem is not to ameliorate damage, but to work its special relationship with government officials. According to Dutta and the CEC, the situation at Orissa throws the integrity of the authorities in question.

Indeed, the CEC hints at complicity between the company, the Union Ministry of Environment and the Orissa government. In its report, the committee writes: “The casual approach, the lackadaisical manner and the haste with which the entire issue of forests and environmental clearance for the alumina refinery project has been dealt with smacks of undue favour/leniency and does not inspire confidence with regard to the willingness and resolve of both the State Government and the MoEF to deal with such matters keeping in view the ultimate goal of national and public interest.”

Besides the clear cutting, there is the issue of “demolition of tribal villages on the land that Sterlite wanted to occupy,” says Dutta. In 2004, two tribal villages were razed, and the residents were forcibly relocated to resettlement camps. Since then, two more villages have been evicted with help from the state police and company-sponsored goons, according to tribal rights activist Prafulla Samantara.

As of November 10, armed police stationed around Lanjigarh were preventing tribals and activists from congregating at the plant gate to protest the Vedanta project’s illegal construction, said Samantara. Police have detained several tribal leaders and their supporters, he said, and a cordon around the village was keeping him from protest site.

The non-profit People’s Union of Civil Liberties investigated the human rights violations reported by Lanjigarh residents and concluded: “It is hard to believe that [the area] is a part of the same India that the elite continuously brags about having catapulted into twenty-first century. ...The people are terrorised, and believe (perhaps rightly) that their attackers enjoy the support of the police. This apprehension of the people is reinforced by the fact that the attackers admit in public that they have attacked the agitating villages.”

Nityanand Jayaraman is a Chennai-based journalist investigating and reporting on corporations and their impact on environment and human rights.