Two and a half years ago, Vedanta’s BALCO subsidiary was accused of illegally constructing a coal-fired power plant whose chimney collapsed, killing at least forty two workers in the Indian township of Korba, Chhattisgarh. Critics claim the UK-listed company then proceeded to build a replacement plant without obtaining necessary permits.

Last weekend, these allegations were confirmed by documents obtained under India’s Right to Information Act, leading the mayor of Korba to declare: “We have strongly objected and sought to dismantle the illegal construction in the past. Notices have been issued to Balco repeatedly and stiff fines imposed. Better speak to the police why no action has been taken after the complaints were lodged”.

See http://www.minesandcommunities.org/article.php?a=11651.

See http://articles.economictimes.indiatimes.com/2011-09-23/news/30194132_1_dantewada-based-maoist-factions-essar-group-essar-officials.

The release of a wikileak (below) last week raises questions about the operations (and governance) of one of the largest companies recently registered on the London Stock Exchange – one which shot straight into the FTSE 100 on its Initial Public Offering (IPO) of 7 May 2010.

In fact, Essar Energy plc’s debut marked the largest-ever listing of an Indian company on London’s main trading market, priced at £1.3 billion (making it  more significant than that of Vedanta in December 2003); and smaller in recent years only to those of Glencore and ENRC.

As Dow Jones newswires (helpfully) pointed out at the time:

“A premium listing means the company is expected to meet the U.K.’s highest standards of regulation and corporate governance…However, the company was hit by volatility in stock markets following a wave of credit downgrades in Europe that rattled investor confidence and lowered the price for its stock offering to 420 pence, from its previous range of 450 pence to 550 pence, to ensure a more successful debut. Shares have continued to tumble since the IPO.

“As the IPO was being marketed, analysts had raised concerns about the company’s corporate governance.”

[DJN 7 May 2010].

In fact , over the past year, Essar Energy’s fortunes have declined further. Its market capitalisation (marcap) at the time of its listing was estimated at around £5.47 billion.

But on 6 September 2011, its marcap stood at only £3.064 billion.

Essar Energy was “spun off” from India’s  Essar Group, one of the three most powerful,  geographically extended, diversified (and controversial) power companies on the subcontinent, with investments in coal mining , oil and gas, and associated refining and power production.

Getting exposure to foreign markets through listing in London was a no-brainer for the Group. In the past year Essar Energy has brokered a refinery deal with Kenya’s state oil company and, inter alia, with Shell UK.  Most recently (in July 2011) Essar Energy acquired the Stanlow oil refinery at Ellesmere Port, Cheshire.

The company operates four power plants in India and one at Algoma in Canada – which powers the eponymous steel plant, wholly-owned by Essar Global Inc. This is the holding company for the  Essar Group’s 76% controlling shareholding in Essar Energy plc (see below).

Essar Energy plc’s  “diverse portfolio” includes 17 blocks and fields for the exploration and production of oil and gas in India, Australia, Indonesia, Madagascar, Nigeria and Vietnam.

Mining-related interests

In July 2010, Essar Energy plc’s subsidiary Essar Power Ltd (EPL) signed a binding agreement to acquire Navabharat Power Pvt. Ltd.–a coal power plant project in India. This is a. 2,250-megawatt coal-fired power plant project in the Dhenkanal district of Orissa on India’s east coast (DJN 13 July 2010).

In September 2011 Essar Energy said it planned to bid for coal-bed methane and shale gas blocks in Indonesia, and would also bid for “similar assets” in China at the end of the year [Business Standard 14 September 2010). S.R. Agarwal, director and chief executive officer of Essar Exploration and Production India Ltd commented that “This would be our first international foray into unconventional resources. Indonesia opens its CBM blocks auction next month and we would be bidding for the same. We would seek approval of the Essar Energy PLC board for the same," No further news is available.

Although Essar Energy plc’s direct involvement in mining and coal  is so far relatively minor, the ownership and governance of  the London-listed company is firmly in the grip of the Essar Group itself (though its subsidiary, wholly-owned Essar Global), with the brothers Ruia (Ravi and Prashant – respectively the chairman and vice-chairman of Essar Energy plc) between them holding 76.72% of the company’s share capital.  (The only other main shareholder is Bank of New York Nominees, with 3.35%).

When, therefore the Essar Group announced in March this year, that it “may jointly bid [with India’s JSW Energy] for Australia-based Hancock Holding Co.’s (HBHC) two coal mines worth $2 billion”  [Financial Express 28 March 2011] the prospects are high that, were a deal concluded, management of the mines would end up in Essar plc’s hands. (The point being that the Group may find it easier to raise the capital required to purchase and operate the mines more easily in London than in Mumbai).

In any case, the wikileaks revelation – though not a major surprise (Tata has also been accused of backing “both sides” in the war on tribal communities in Chhattisgarh) – does raise serious questions about Essar Energy plc’s governance, in light of the control exercised by the Essar Group itself; and specifically to what extent the UK Bribery act might be used against its UK subsidiary (if at all).

The extraordinary statement, accredited to an Essar Group spokesperson in the wikileak, that the company “sets different Maoist groups against each other to suppress the situation” must (if verified) surely be one of the most horrendous ever made by a major extractive company, anywhere.

At the very least, we should demand to know why two of the three executive directors of a London company (already criticised for its poor governance since listing) have apparently admitted to funding “terrorist” groups; albeit in a foreign country and in their capacity as directors of an Indian-based corporation.

Essar rejects allegations of paying Maoists protection money
http://www.moneycontrol.com/news/business/essar-pays-protection-money-to-maoistscgarh-wikileaks_583021.html

WASHINGTON: The Ruias-led Essar Group, which has mining interests in Chhattisgarh, pays protection money to Maoists to safeguard its operations in the state, a leaked US diplomatic cable said.

“A senior representative from Essar, a major industrial company with large mining and steel-related facilities in Chhattisgarh, told Congenoff (Consul General Office) that the company pays the Maoists ‘a significant amount’ not to harm or interfere with their operations,” a cable dated January 11, 2010, originating from the US consulate in Mumbai and released by WikiLeaks stated.

“When the Maoists occasionally break this agreement and damage Essar property or threaten personnel, Essar sets different Maoist groups against each other to suppress the situation,” it said.

The cable said the Maoists pose a real threat to development and security in the region and efforts to bring these areas back into the orbit of the government is warranted.

As the government prepared to initiate action against the Naxals in Chhattisgarh, the US consulate, based on the trip of its officials to the region, said that the potential for human rights abuses by the security forces in the state is high.

photo: Kerima Mohideen

Vedanta bosses clash with protesters over pollution and human rights

Anger erupted inside and outside Vedanta’s annual meeting on Wednesday as campaigners protested against the mining company’s environmental and human rights record. The London Mining Network says Vedanta’s record has not markedly improved, with 26 fatalities at its mines reported last year and a waste dump in Goa overflowing this month. “As a result, millions of tonnes of mud and silt flooded into the [Goan] village of Mulgao, swamping farmland, choking rivers and threatening people’s livelihoods,” said an LMN spokesman. Vedanta has offered to compensate farmers.

See http://www.guardian.co.uk/business/2011/jul/27/vedanta-protests-annual-meeting-pollution-human-rights?INTCMP=SRCH.

Vedanta faces angry protesters at AGM

India-focused miner Vedanta faced two hours of angry questioning on Wednesday, as its board was forced to defend the company against accusations from investors and pressure groups that it has repeatedly breached health and environmental rules. Pressure groups including Survival International, Amnesty International and others have long opposed a projected bauxite mine in India’s Orissa state, planned for an area considered sacred by indigenous people, as well as proposals to increase capacity at Vedanta’s Lanjigarh alumina refinery to 6 million tonnes per year from 1 million.

See http://af.reuters.com/article/commoditiesNews/idAFL6E7IR2E220110727.

Protesters demand action against Vedanta

Shareholders of Vedanta Resources, a FTSE 100 company that has been embroiled in a row over its activities in India, were on Tuesday booed by protesters gathered outside the venue of its Annual General Meeting in Westminster. They called for its expulsion from India and an investigation into its trade practices and human rights record.

See http://www.thehindu.com/news/national/article2300115.ece

Read notes of the AGM from an eye witness.

photo: Kerima Mohideen

photo: Kerima Mohideen

Matters of grave concern: Vedanta Collapses

Taking place here today (27 July 2011) is the Annual Shareholders’ Meeting of one of the world’s 20 leading mining companies, London-listed Vedanta Resources plc.

This company stands apart from its peers by having the worst health, safety and environment record of any mining company based in the UK – indeed virtually anywhere in the world.

We invite you to examine some of the accidents and disasters occurring on Vedanta’s watch within the past five years; the latest just eleven days ago:

16 July 2011: A waste dump at a Vedanta iron ore mine in Goa (India) collapses in numerous places: millions of tonnes of mud and silt flood into the village of Mulgao, swamping farmland, choking rivers and threatening people’s lives.

5 April 2011: Toxic wastes cascade from a breach in Vedanta’s caustic red mud pond at its Lanjigarh alumina refinery in Orissa (India), contaminating the adjacent Vamsadhara River.
16 May 2011: There’s a “copycat” failure at the same pond. Amnesty International warns that “thousands of families in…Orissa are [now] facing serious health risks during the imminent monsoon season.”
In July 2011, the Chief Minister of Andhra Pradesh says the pollution has crossed the state border and “people in many mandals [administrative divisions] of Srikakulam district are facing health hazards due to contaminated drinking water.”

1 November 2010: Vedanta’s subsidiary, Konkola Copper Mines (KCM) in Zambia is fined for polluting the Kafue River, killing fish and leaving local inhabitants without tap water. This is the very river polluted by Vedanta four years earlier.
On 6 November 2006, acidified effluents cascaded from burst slurry pipelines at KCM. They gushed into the Kafue River, raising its copper concentrations to 1,000% of acceptable levels, concentrations of manganese to 77,000% (sic) of the legal limit; and those of cobalt to 10,000%. Domestic water supplies are cut off for 75,000 residents in the town of Chingola.
26 March 2010: Four workers die when ground collapses around them at Vedanta’s Nchanga copper mill in Zambia.

24 September 2009: A chimney, under construction for a coal-fired power plant at Vedanta’s Korba aluminium complex in India’s Chhattisgarh state, topples to the ground.  At least 41 workers are buried alive. Vedanta is accused by Korba’s police chief of illegally embarking on the construction at the outset. Three top Vedanta officials are arrested and charged with “culpable homicide” – one degree below murder.
In October 2010, Vedanta’s chairman, Anil Agarwal, is summoned to give evidence at the Korba District Court in answer to a charge of Criminal Trespass relating to the previous year’s events. He refuses to attend.

24 August 2009:  During heavy rains, a vast mudslide sweeps into underground workings of Vedanta’s Mt Lyell copper mine in Tasmania, Australia. The mine is closed, leaving 180 workers and their dependents stranded without paid leave.

Collapse of Vedanta’s credibility

Between November 2007 and 2011 a significant number of investment funds ejected Vedanta Resources from their portfolios, citing the company’s unethical behaviour and its failure to address human rights and environmental issues.

Among these were: Norway’s Government Pension Fund; the Church of England; PGGM (a major Dutch Pension Fund); the Joseph Rowntree Charitable Trust; and Northwest and Ethical Investments (Canada).

If you, your Pension Fund or Bank, currently finance Vedanta in any way, we urge that you seriously examine evidence of the company’s woeful failure to meet rudimentary operational standards, during the eight years since its admission to trading on the London Stock Exchange.

Norway’s Council on Ethics in November 2007 concluded that, continuing to invest in Vedanta would present “an unacceptable risk of contributing to grossly unethical activities.”

Since then, such activities have multiplied. So, too, have the reputational risks of backing a company that makes a mockery of “corporate social responsibility.”

For further information on Vedanta’s record, please see:
http://www.minesandcommunities.org/list.php?r=831

This leaflet was authored by Nostromo Research
for London Mining Network,
http://londonminingnetwork.org
Phone 07929 023214
Email contact@londonminingnetwork.org

See http://www.minesandcommunities.org/article.php?a=10777.

The mandatory public hearing was held by authorities to seek the consent of the villagers for the grant of environment clearance to mine coal in the region. The area’s coal reserves, estimated at 70.12 million tonnes, are spread out over 1,070 hectares in Taraimar under Dharmajaygarh block in Chhattisgarh’s Raigarh district, some 300 km from the state capital, Raipur.

The coal is needed to feed a 800 MW captive power plant of Vedanta Resources Plc-controlled Balco, in which the Central government holds 49 percent stake. The Balco (Bharat Aluminium Company) plant is located in Korba town in the state, some 80 from away from the public hearing site. 

See http://www.thestatesman.net/index.php?id=357535&option=com_content&catid=35.

India’s home-grown, but foreign-fed, mining supremo Anil Agarwal never lets the opportunity slip to postpone the (almost) inevitable. His UK-listed company, Vedanta, backed by the Orissa state government and local supporters, has been pressuring India’s environment ministry to reverse its decision last year to ban a 6-fold expansion of its alumina refinery in Lanjigarh. And this – even as the country’s Human Rights Commission expresses strong fears that construction of the plant has already forcibly displaced local villagers.

Meanwhile, young people in Chhattisgarh have blockaded ore shipments from Vedanta’s Mainpat bauxite mine -itself believed to supply ore to the Lanjigarh refinery. The protestors complained that, while destroying the environment, the company was neither offering them employment nor providing local infrastructure.

However, Mr Agarwal now finally seems to have failed in launching his dream university on purloined land  in Orissa. India’s Supreme Court has confirmed last year’s High Court order that he quit the area.

See http://www.minesandcommunities.org/article.php?a=10674.

See http://www.bbc.co.uk/news/world-south-asia-11998115.

Hardly a month passes without yet another serious accusation being levelled against Vedanta Resources plc – the mining company which, some have argued, is the “worst” on the planet.

In September 2009, a chimney being constructed for Vedanta’s Balco aluminium subsidiary in Korba district, collapsed, killing  at least 41 workers. Now, a local magistrate has ordered owners of the company – not just those in charge of operations on the ground – to answer charges that construction of the chimney was itself  illegal. In theory this could mean Vedanta’s chairman and majority-owner, Anil Agarwal, himself being called to court.

Meanwhile, Vedanta Aluminium has been found guilty of expanding its Lanjigarh alumina refinery without obtaining a proper permit. Whether the company will be given more than a slap on the wrist for breaking the law is decidedly moot, especially now that Vedanta’s “poodle” – the Orissa state government – says it doesn’t see anything wrong with the company’s actions.

See http://www.minesandcommunities.org/article.php?a=10499.

See http://indigenouspeoplesissues.com/index.php?option=com_content&view=article&id=7044:chhattisgarh-vedanta-resources-brews-controversy-over-bauxite-mining-in-maikal-hills&catid=63:central-asia-indigenous-peoples&Itemid=85.

The British Safety Council (BSC) is one of the world’s leading safety watchdogs. It employs 90 staff members and operates in 50 countries including India.

Yet, late last month, it claimed not to “be aware of” the deaths of at least forty workers, following Last September’s collapse of a chimney which was being constructed for UK-listed Vedanta’s Balco in the Indian state of Chhattisgarh. This was the worst disaster of its kind in the country’ recent history, and it was widely reported in the international media, including by the BBC – which featured some graphic photographs. In the weeks following the tragedy, three Vedanta officials were arrested and charged with “culpable homicide”.

Despite this, The Observer newspaper claims that, only when it recently reported the dire safety record of UK-listed mining companies, did the BSC withdraw a Safety Award  previously granted to Balco.

In fact, the Council has actually dispensed two accolades to the Vedanta subsidiary -  something that this most deceitful and delinquent of major mining outfits proudly boasted to advance its credibility among investors.

See http://www.minesandcommunities.org/article.php?a=10358.

It wasn’t a foregone conclusion. However, following the unequivocal high-level condemnation of Vedanta’s proposed bauxite mining of the Nyamgiri hills in Orissa, a fortnight back, it would have been surprising had India’s environment minister not halted the project in mid-stream. It’s also little wonder that both domestic and international media made a great deal of this victory. The issue has proved to be one of the most contentious of its kind anywhere, during recent years. But we may ask whether this really was a “David versus Goliath” battle, as portrayed by some – and whether the struggle is over?

See http://www.minesandcommunities.org/article.php?a=10346.

See http://economictimes.indiatimes.com/news/news-by-industry/indl-goods-/-svs/metals–mining/Vedantas-Balco-alleged-of-encroachment-environment-ministry-orders-probe/articleshow/6449298.cms

Predictably, the 2010 AGM attracted more media attention than ever before. Nonetheless, the Nyamigiri issue overshadowed all others. This was despite the fact that Vedanta’s allegedly criminal behaviour in Chhattisgarh (where over 40 workers went to their death last September), in Goa and elsewhere were raised by a number of shareholders.

See http://www.minesandcommunities.org/article.php?a=10272.