Sterlite Copper

Serial offender

Print edition : June 22, 2018

The Sterlite plant in Thoothukudi on May 27. Photo: N. RAJESH

Sterlite’s culpability in Thoothukudi is only rivalled by the record of the Tamil Nadu government and its prime regulatory arm in this case, the TNPCB.

The massacre at Thoothukudi marks a major escalation in the long-festering confrontation that Sterlite has had with the local community ever since it entered the town in 1994. Its controversial conduct since then—in terms of both the impact if its operations on the environment and its workplace safety record—suggests a brazenness that popular imagination readily associates with the nexus between political and corporate power. The fact that the Vedanta Group, the parent to Sterlite Copper which runs the Thoothukudi plant, specialises in the extraction of natural resources gives this nexus the ominous ring of cronyism masquerading as capitalism.

Buyer, rather than builder

The Vedanta Group is relatively young, a precocious child of the Indian economic liberalisation programme. The journey began in 1976 with the founding of Sterlite Industries by Anil Agarwal, its executive chairman, long before the group took up its current name with its grand philosophical connotation. Vedanta Resources was established in 1983 and listed in the London Stock Exchange in 2003. Today, while it is the largest non-ferrous metals company in India, it is also regarded as a global corporation by virtue of its operations in Australia and Zambia.

The company has interests in copper, aluminium, zinc and lead, iron ore and pig iron, gold, metallurgical coke and crude oil. However, the most striking aspect of its rapid rise as a resources-based global entity lies in the manner in which it has bought—rather than built afresh—from existing private and public sector companies in India. The group’s overall revenues in 2017 amounted to more than $11 billion, with a net profit of $880 million.

What explains this dramatic rise, which is frequently depicted in popular media lore as Anil Agarwal’s rise from a mere scrap dealer to a global Metals Czar? The answer lies in the manner in which the Vedanta Group has acquired mines and production capacities from existing entities. Its Indian acquisitions started with the controversial privatisation of Bharat Aluminium Company (Balco), the Indian pioneer in integrated aluminium production, during the first tenure of the National Democratic Alliance (NDA) in 2001. The following year, Sterlite acquired a controlling stake in India’s only integrated zinc producer, the public sector Hindustan Zinc Ltd. Writing in the media later, Pradip Baijal, the then Disinvestment Secretary, remarked that Anil Agarwal was moved to “tears” at the prospect of acquiring the monopoly, which opened avenues for Sterlite to the zinc, lead and silver markets. In 2007, it acquired Sesa Goa (founded in 1954) to expand operations into ferrous metals. In 2017, Cairn India merged into the Vedanta Group, which gave it a presence in the oil and gas business through its fields in Rajasthan.

Meanwhile, in 2004, Vedanta acquired the Konkola Copper Mines in Zambia, where it ran afoul of the local community, which dragged it to courts in London for abusing the environment. Vedanta currently has a 74.9 per cent stake in the Zambian company. After the closure of the Thoothukudi plant, Vedanta has only this copper production facility up and running. Information available from the company indicates that Vedanta depends heavily on Indian output and would be desperate to not only start production but expand capacity soon. Vedanta’s copper output from India was about 403 kilo tonnes (in cathodes, the primary raw material input for the production of copper rods for the wire and cable industry), compared with the integrated output of 84 kilo tonnes from its Zambian facilities. With the Indian output frozen, Vedanta’s copper output will fall drastically. This explains why Vedanta is betting so heavily on the Thoothukudi facility, while appearing to bide its time to break loose from the legal shackles that the Tamil Nadu government appears to have placed on it for the time being.

Balco acquisition: a milestone

In hindsight, the Balco acquisition in 2001, at what was even then widely recognised as a “good buy” at a throwaway price, was the first stepping stone to Sterlite’s (later Vedanta) runaway success as a mega corporation (see “Battle over Balco”, Frontline, March 30, 2001). The general consensus was that the integrated aluminium major was worth much more than the Rs.551.50 crore that Sterlite paid for it. On the day Sterlite won the bid for Balco, more than Rs.90 crore worth of saleable materials were lying in Balco’s premises; scrap worth at least Rs.50 crore; inventory worth Rs.70 crore; and raw material worth Rs.100 crore were also present. The list excludes Balco’s 270 megawatt captive power plant, which itself would have been worth several hundred crores at the very least and was sold to Sterlite as part of Balco’s assets. Incidentally, Sterlite’s poor safety record is not confined to operations in Thoothukudi; in 2009, a chimney under construction at the Balco smelter in Korba, Chhattisgarh, collapsed, killing at least 40 workers. The Sterlite management and its contractor were accused of negligence, but as in Thoothukudi the company escaped unscathed.

Controversial track record

The company’s track record at Thoothukudi has been dismal right from the beginning. Sporadic protests erupted soon after the then Chief Minister, Jayalalithaa, laid the foundation stone for the plant in October 1994. But when the plant commenced trial production in 1997, the protests escalated and became more unified and organised (see “Pollution threat”, Frontline, January 24, 1997). Then, as now, the fisherfolk in and around Thoothukudi acted as the fulcrum for the protests. The environmental clearances given to the company were suspect even then. Although the company refused to provide this correspondent with documents showing its environmental clearances, a company source, “for reasons of conscience”, provided access to these documents. The most shocking aspect of the clearances by the Tamil Nadu Pollution Control Board (TNPCB) was the fact that the company’s Environment Impact Assessment was submitted before it actually finalised the plant’s technical design and its environmental pollution mitigation plans. The Tamil Nadu government allotted 156 hectares of land, guarantees for water supply and several fiscal concessions, including ones on the then prevailing sales tax.

Sterlite’s operations started badly. Soon after the plant started operations, in July 1997, there was a gas leak that affected more than 100 workers and people outside the factory in Thoothukudi. After being shut for 39 days because of this incident, it commenced operations again, only to be rocked by a major accident at its smelter that resulted in the death of two workers and serious injuries to two more. The accident happened because the smelter with molten copper fell on the workers (see “Fatal explosion”, Frontline, October 3, 1997). Incidentally, the Dravida Munnetra Kazhagham (DMK) was in power then. What really angered the local community was the company’s initial attribution of the accident to “sabotage” and the even more ludicrous charge that a “bomb blast” caused the explosion. In fact, police officers dismissed these theories of the management and urged it to take “corrective measures”.

Since then, local residents have complained of several accidents at the smelter. However, since the victims were mostly casual workers employed by contractors, the company has never accepted liability and paid compensation. The employment of casual workers is meant not only to reduce the company’s wage bill but to escape liabilities arising from compensation claims following accidents at the plant.

Meanwhile, the company’s environmental track record has been repeatedly shown to be non-transparent. The fact that the TNPCB has not applied environmental standards strictly has only emboldened the company. A senior metallurgist at a leading Indian corporate told Frontline that Anil Agarwal’s claim, in a recent interview to a leading financial daily, that the Thoothukudi plant is “a zero discharge” facility is “simply impossible”. “Copper smelters all over the world are known to be polluters, which is why they are being relocated to poorer developing countries where lives are considered expendable,” the metallurgist said.

John Vidal, writing in The Guardian in 2015, reported that the people of Chingola in Zambia, although not close to the Konkola mine, suffered the consequences of pollution. Vidal wrote that even as early as 2011, the company realised the harm it was causing – copper residues, acid and minerals. More than 1,800 people from surrounding villages filed a petition in 2015 alleging that the company had ruined the groundwater, a river and the air in places where they lived. This is very similar to what people in Thoothukudi have been complaining about for more than 20 years. Sterlite’s culpability in Thoothukudi is only rivalled by the record of the Tamil Nadu government and its prime regulatory arm in this case, the TNPCB. There was evidence to show that the environmental balance in the town even before Sterlite entered the picture was shaky. The port, the thermal power generation plant and the fact that it was close to an ecologically fragile zone meant that the case against a copper place near the town was already a risky proposition. Allowing Sterlite to come to town, it appears, was the original sin, from which all other wrongdoing followed.

Corporate-politician nexus

But what emboldens a corporation to stridently confront a community that has made it abundantly clear that it is trespassing on their lives? The answer to this is partly in the fact that Vedanta has been a regular contributor to not just the ruling Bharatiya Janata Party (BJP) but to the Congress as well. Neither of the mainstream political parties has questioned or challenged the meteoric rise of the company in its short history. This can only mean that they are willing to be partners, whatever the cost. As the 2G scandal and the coal scam demonstrated, the allocation of natural resources such as mines or airwaves to private players involves considerable discretionary powers to the state; this implies that this also allows for abuse without adequate checks and balances. On the other hand, when political power is compromised, regulatory arms of the state such as those enforcing environmental standards are compromised, too. Notably, the TNPCB’s utter failure to obtain public approval through a transparent process of public consultation and enforcement has been the prime casualty of this utterly rotten nexus.

It is evident that Sterlite is merely buying time. It has shown remarkable consideration in accommodating the delicate situation that political authority finds itself in after the murderous assault on an unarmed people. However, a Reuters report cited a Vedanta official as saying that the government had not “presented a single piece of evidence” and indicated that it would mount a legal challenge at an opportune time. For its part, the State government has erected a legal edifice that is bound to collapse at the slightest challenge. The closure of the plant ordered by the State government, ostensibly because it is against the “public interest”, is so ridiculously weak that one may be forgiven for assuming that Sterlite asked for it! That a government would fire on its own people in order to stand by its “commitment” to a private conglomerate is but an indicator of the stranglehold such conglomerates enjoy over the state.

With all eyes on the World Cup in Russia, a footballing analogy may be in order. Imagine a high-stakes match between the people of Thoothukudi and Sterlite in which the referee takes the penalty kick for Sterlite. That is what the people of this town are up against, a supposedly neutral referee who is playing as the star striker for the metals conglomerate.

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