Norwegian government indicts Vedanta as "grossly unethical"
Norwegian government indicts Vedanta as "grossly unethical"
12th November 2007
The world's second largest sovereign pension fund, operated by the Norwegian government, last week sold all its shares (worth around US$13 million) in Vedanta Resources plc.
The fund's Council on Ethics, after nearly two years research, found that the continuing to invest in the UK company would present "an unacceptable risk of contributing to grossly unethical activities".
The media reacted to the announcement both swiftly and with commendable accuracy.
In contrast, the company's reaction was weak at best, and mendacious at worst.
Vedanta's supremo, Anil Agarwal, said he was "not aware of any such situation" because he had "just landed in India". And a Vedanta spokesperson in London couldn't comment either: the Norwegian decision, he said, "was probably linked to an ongoing court case in India over the company's mining operations in Orissa."
Shortly afterwards - as the story refused to go away - the company further stated that it's lack of response was due to ongoing legal action at the Indian Supreme Court related to its claim on the Nyamgiri bauxite deposit in Orissa.
In fact, many allegations relating to Vedanta's operations elsewhere are contained in the report. The company had also been notified in early 2007 about the Norwegian Council's investigation and sent a draft copy of its allegations.
Twice, Vedanta promised to respond and the Council extended its deadline - the company ignored it. Ironically, the Supreme Court last month issued a verdict on the mining of Nyamgiri which is in Vedanta's favour, although the company still has to meet certain conditions before it can proceed. (Not to mention the wrath of the Khond tribal communities and many Indian human rights and environmental activists.)
Since early 2004, this website has carried detailed information on the manifold delinquencies of Vedanta, and the struggles to bring it to book. We have ranked the company as one of - if not the - most dangerous and damaging mining outfits in the world.
Now a highly-respected state authority has confirmed virtually all the allegations that have been made.
But sadly, while Vedanta's share price took a momentary knocking last Tuesday following the Norwegian decision, its medium-term prospects appear not to have been substantially dented.
Just three days later, and true to form, the company announced that was considering an IPO (Initial Public share Offering) to raise US$2 billion for its entry into India's energy sector.
These days it’s damned hard to keep a bad man down. Worse, there’s clearly a long way yet before those backing him and his cronies learn what the term “ethical behaviour” actually means.
[Comment by Nostromo Research, London, November 12 2007]
To read the Council's full report go to:
Norway govt fund sells its Vedanta stake
Padmaparna Ghosh, Mint
7th November 2007
New Delhi: A $350 billion (Rs13.76 trillion) sovereign wealth fund run by Norway has sold its entire stake in Vedanta Resources Plc., a mining and metals company with a significant presence in India, and operations in Zambia, Australia and Armenia because of what one Norwegian government official referred to as "environmental and human rights violations" by the firm.
Shares of Vedanta on the London Stock Exchange were trading at £20.71 (Rs1,702) each, down 2.03% at 3.46pm GMT.
"I am not aware of any such situation because I have just landed in India," said Anil Agarwal, chairman of Vedanta.
Norway's government pension fund, Global, commonly known as the "oil fund", invests Norway's petroleum wealth in foreign stocks and bonds to save for when its oil and gas run out. It is one of the world's biggest sovereign wealth funds. At the end of 2006, the fund owned a 0.16% stake in the company worth $15.16 million. The country's finance ministry said all shares had been sold by the end of October.
Other Vedanta officials denied the ministry's charges.
"Vedanta Resources absolutely rejects any suggestion of causing damage to people and the environment. We believe in sustainable development and are committed to effective management of health, safety, environment and community development as an integral part of our business. The impact of our investment in some of the world's poorest regions has been remarkable and acknowledged," said Tarun Jain, director, Sterlite Industries Ltd, Malco Ltd, Balco Ltd and Hindustan Zinc Ltd (all Vedanta group companies), and a spokesperson for the firm.
Vedanta's operations in India are spread over 19 production sites in six states. "According to the recommendations (of the ethics council of the fund), the fund runs an unacceptable risk of complicity in present and future severe environmental damage and systematic human rights violations by continuing to invest in the company," Norway's finance ministry said in a statement late on Tuesday.
The ethics council said, "allegations levelled at the company regarding environmental demage and complicity in human rights violations, including abuse and forced eviction of tribal people, are well founded." It said its review extended to Vedanta subsidiaries Sterlite, Malco, Balco and Vedanta Alumina, though the fund did not have direct holdings in those companies.
The council said it had contacted Vedanta Resources in March asking for its comments on its (the council's) draft recommendations and, after an extension, had given the company until 20 April to respond. But the company did not respond till 15 May.
Last month, thousands of tribal people protested against a Vedanta Resources alumina refinery being set up in the Lanjigarh area of Orissa and vowed to stop the $874 million project. This project involves mining bauxite in the Niyamgiri hills.
It has already been challenged in the Supreme Court by those being displaced. "In cases of severe unethical activites, we try to use our ownership to make the companies change their behaviour; however, the violations of Vedanta have been so serious and we don't see any initiative from the company to change its past record. Therefore, we do not want to contribute in a company, where environmental and human rights violations seem to be a part of their business strategy," said Roger Schjerva, state secretary, ministry of finance, Norway, in a telephone interview.
Jain denied these charges and added that several of Vedanta's companies in India had won awards for environmental management, including an award that Malco won for 'Excellence in Environment Management' from The Energy Research Institute (Teri).
The ethics council of the fund examined instances of illegal expansion of capacity, health and environmental damage at the Tuticorin copper smelter and refinery run by one subsidiary, environmental impact and health burden on the local population at the Malco complex in Tamil Nadu, forced eviction of tribals for a bauxite mine in Chhattisgarh and human rights violations, forced evictions, threats and abuses against local residents as well as breaking national laws and providing false information to obtain an environmental clearance for the proposed bauxite mining site in Niyamgiri.
The oil fund has, on the recommendations of its ethics council, blacklisted 24 companies and withdrawn investments from them in the past. "In the past, we have withdrawn from Wal-Mart on human rights and forced labour issues and also from Boeing as they were involved in weapons production, which we don't support," added Schjerva.
Recently, the fund has withdrawn from the South African mining company, DRD Gold, South Korean arms company Poongsan Corp., mining company Freeport operating in Indonesia, and seven more companies involved in manufacturing nuclear weapons.
Mint's Maitreyee Handique and Reuters contributed to this story.
Norway's global pension fund drops mining group Vedanta on environment, ethics concerns
Intetrnational Herald Tribune
7th November 1007
OSLO, Norway: The Norwegian government global pension fund has dropped British mining and metals group Vedanta Resources PLC due to concern about its environmental and human rights record, the finance minister announced Wednesday.
"Excluding a company from the fund is an expression of our unwillingness to run an unacceptable risk of contributing to grossly unethical activities," Finance Minister Kristin Halvorsen said in announcing the decision.
Alex Pettifer, a spokesman for Vedanta in London, said he could not comment because the Norwegian decision was probably linked to an ongoing court case in India over the company's mining operations in Orissa.
Norway, a nation of 4.7 million people, is a major oil and natural gas exporter. It sets aside surplus revenue in the Government Pension Fund-Global — formerly the oil fund — currently worth about 2 trillion kroner (US$374 billion, €256 billion).
A national Council of Ethics routinely reviews investments by the fund, and, acting on its findings, the finance ministry on Aug. 28 ordered the fund to sell off about 70 million kroner (US$13 million, €9.0 million) in Vedanta shares. The fund announces such sales only after they have been completed to avoid influencing share prices.
The council said Vedenta's core business is linked to mining and production of copper, aluminum, and zinc in India, and that it had investigated the environmental, human rights and labor practices of four of its subsidiaries in India.
"The allegations leveled at the company regarding environmental damage and complicity in human rights violations, including abuse and forced eviction of tribal peoples, are well founded," a statement from the council said. "In the council's view, the company seems to be lacking the interest and will to do anything about the severe and lasting damage."
Vedanta, which also has operations in Australia and Zambia, said on its Web site that it is committed to conducting socially responsible business, and seeks to minimize the environmental impact of its operations. It said its business ethics policy includes employee training, equal opportunity, and providing housing, schools, medical and recreations facilities for its staff and their families.
The Norwegian council said its recommendation was based on reports from Indian authorities, the news media and nongovernment groups, as well as its own investigations.
"The violations against the environment and human rights that have been revealed are recurrent ... and have taken place over many years," the council said in its recommendation.
Vedanta shares were down 0.9 percent to 2,095 pence (€30.09; US$43.67) on the London Stock Exchange.
Since the Norwegian government imposed the ethical guidelines in 2004, 19 other companies remain excluded for reasons that include environmental and human rights concerns, as well as such things as having a role in developing nuclear weapons.
Vedanta faces more protests over environment
By Peter Foster in New Delhi, Daily Telegraph (UK)
This has been a tough week for the British mining giant Vedanta PLC which is facing increasingly vocal protests in India about the destructive nature of its aluminium operations.
On Tuesday Norway's finance minister, Kristin Halvorsen, announced he had withdrawn all investments in Vedanta after the country's ethical council concluded that the company "has caused serious damage to people and to the environment as a result of its economic activities."
The day before Norway's announcement some 30,000 poor Indian farmers from the eastern state of Orissa gathered to protest at the massive reduction of irrigation waters to their land in order to supply, among others, the aluminium industry.
Local activists claim that water supply to heavy industry from the massive Hirakud Dam in northern Orissa has increased 27 times over the past decade, with disastrous consequences for farmers who depend on irrigation to grow their crops.
Meanwhile, a few hundred miles away in western Orissa, a group of Indian tribal people, the Dongria Kondh are planning protests of their own after India's Supreme Court made clear that it will grant approval for Vedanta to mine the heavily forested Niyamgiri Hills for bauxite, the raw material from which aluminium is produced.
Neither of these last two items of 'news' will have featured on the radar of most Western newspapers or TV channels, but they are indicative of a growing and under-reported conflict between the demands of 'international development' and the lives of the world's poor.
Sometimes in the West it is too easy to conceive the debate about the exhaustion and pollution of the planet in long-distance terms - we cycle to work, or recycle our yoghurt pots to do our bit to stave off an environmental disaster which the scientists warn us will occur at some point in the future, as yet undetermined.
However for many of the 700m Indians - and four billion people worldwide - who live on less than one pound a day, the environmental consequences of sustaining (and aspiring to join) the industrialised, developed world are increasingly being felt here and now.
In the case of India, where 350m people still live on less than 50p a day and almost half of all children are malnourished, the tensions caused by development spill out into violence on an almost daily basis.
Vedanta's aluminium operations are only a tiny part of that story, but they are symptomatic of a wider conflict which even threatens to undermine the 'growth story' which occupies a disproportionate amount of the headlines abroad.
Large tracts of eastern India are in the grip of a violent Maoist revolt - known as "Naxalism" - which is being fuelled by the sense that ordinary people are not being included in that 'story'.
And this isn't a theoretical 'threat' but a revolution that's armed and dangerous. Manmohan Singh, Indian prime minister, described the Naxals as the "greatest threat" to India's internal security. Last week, for example, the rebels killed 15 policemen in a single ambush in Chhattisgarh, the state which borders Orissa - yet another story that won't have hit Western news radars.
Back in Niyamgiri, where I visited early this month, the people who still subsist farming the land and foraging the forests can see very little value for them in Vedanta's bauxite mine and aluminium refinery.
The people have lived sustainably on the forests and hills for centuries and - with simple wisdom - question whether ripping up the ancient Niyamgiri Hills for 25 years of short-term gain can possibly be good for them, or the planet.
Those short-term gains, however, run into billions of pounds. Thanks to booming commodity prices driven by demand from India and China, Vedanta's share price has leapt fivefold from £4 to £21 in just three years, creating massive value for shareholders and investors.
But when the mine goes ahead, the people of Niyamgiri don't expect to see much of that money for themselves, despite guarantees from Vedanta to the Indian Supreme Court that they will spend several million pounds on 'development' for the area.
The truth is that they have no faith in the promises of Vedanta Plc or their own courts and governments. Most of that money, they say, will end up in the pockets of corrupt officials, and history supports their contention.
Such promises have been made many times before, say the activists, but their surveys of Orissa's other mining developments find only contaminated water supplies, destroyed habitats and human displacement while corrupt government officials, investors and shareholders count their wealth in millions and billions.
It is this catastrophic loss of faith - rather than the direct environmental consequences of mining - which is perhaps potentially most damaging to the future of countries like India and China, where growing numbers of people no longer feel they have a stake in their futures while the governments they elected to represent them focus on creating a 'favourable investor climate', rather than a liveable climate for the people.
Vedanta is a case in point. The company's application to mine the Niyamgiris was supported by both the federal and state governments, which to the black amusement of ordinary people who have to deal with Orissa's notoriously corrupt and inefficient local bureaucracy, was even discovered to have faxed a letter on Vedanta's behalf on a Sunday.
Activists also point to a report written by the Indian Supreme Court's own fact-finding committee in 2005 which accused Vedanta - with the connivance of India's Ministry of Environment and the local state government - of "blatantly" violating environmental guidelines during the planning phase of the alumina refinery at Niyamgiri.
And yet, after almost two years of lobbying say activists, the Court decided not to punish Vedanta but to reward the company by granting permission for a project which, as far as they can see, will destroy and not develop their lives and livelihoods.
The consequences of such decisions - in Niyamgiri and beyond - are likely to be bloody.
Norway fund blacklisted company protests decision
Firm says it was unable to defend itself over €9m Norwegian share boycott.
by Hugh Wheelan, Responsible Investor
8th November 2007
Vedanta Resources, the FTSE 250 metals and mining group, blacklisted this week by the €250bn ($366bn) Norwegian Government Pension Fund over allegations of environmental damage and human rights abuses in India, has said it is “disappointed” at the fund’s reaction and claims it was unable to defend itself against the allegations because of legal proceedings at the Supreme Court in Delhi.
A spokesperson for Vedanta said: “There appears to be a misunderstanding. We informed the Norwegian fund that we could not respond because the information they requested was sub-judice in the Indian courts.” Vedanta is mired in legal wrangling with environmentalists in India, including hearings over a controversial £470m bauxite project in the Niyamgiri Hills in the eastern Indian state of Orissa. Campaigners say the mine will disrupt the areas fragile ecosystem and endanger wildlife.
The Norwegian fund, whose investment boycotts are closely monitored by other investors worldwide, pulled €9m in shares from the company and its subsidiaries following a recommendation by the Norwegian government’s Council on Ethics. Its actions could prompt other investors to follow suit. Norwegian Minister of Finance, Kristin Halvorsen, said: “Norges Bank does not regard the exercise of ownership rights as a tool by which Vedanta’s behaviour can be influenced in a positive direction. We cannot hold shares in such a company.” The fund said allegations levelled at the company, including abuse and forced eviction of tribal peoples, were well founded: “In the Council’s view the company seems to be lacking the interest and will to do anything about the severe and lasting damage that its activities inflict on people and the environment.” In 2005, an environmental panel of India’s Supreme Court accused Vedanta of 400 violations of national environmental guidelines.
Norges Bank, which manages the pension fund money, said it had been promised a reply to the allegations in April this year. The Norwegian Ethical Council said the lack of response indicated a “pattern in the company’s practices where such violations are accepted and make up an established part of its business activities.”
The spokesperson for Vedanta said the company had a highly developed policy of corporate social responsibility, including local education programmes in India. The company says it aims to reduce the impact of its activities on the environment wherever feasible and that the majority of its sites are certified to the international environmental management systems standard ISO 14001.
Fund drops Vedanta on ethics concerns
8th November 2007
VEDANTA Resources plc has become the second mining company to be dropped this year from the Norwegian Government Pension Fund, the world’s second-largest sovereign fund, following allegations of “grossly unethical practices” by the UK-based mining firm.
The fund divested shares in Vedanta valued at NKr70 million (US$13.2 million), or about 0.7%, in October on recommendations from the Council on Ethics which guides the fund on environmental and ethical issues.
The council found that allegations against Vedanta with regard to environmental damage and humanrights violations were “well founded” and that they “indicate a pattern in the company’s practices where such violations are accepted”. Kristin Halvorsen, finance minister, said: “We cannot hold shares in such a company.”
The allegations relate to Vedanta’s mining operation in India, including those of the company’s subsidiaries, 80%-owned Sterlite Industries Ltd and 80%-owned Madras Aluminium Company Ltd.
Vedanta said that it was unable to comment on the fund’s decision as the accusations related to a continuing court case in India.
The Indian Supreme Court is to make its final decision regarding Vedanta’s proposals to mine for bauxite in the state of Orissa this month.
The case was brought to the Supreme Court by human rights and environmental groups, including Action Aid International,* [see note] which claims the mine would displace thousands of tribal people and destroy biodiversity and water sources.
The court has requested that Vedanta’s subsidiary Sterlite pay 5% of its annual profits to a government fund to support local communities, as well as depositing Rp500 million (US$12.7 million) with the government, and providing details of how many people would be employed by the project.
In April, the Norwegian fund sold its shares in South African gold producer DRDGold Ltd, citing controversy around DRDGold’s Tolukuma mine in Papua New Guinea. Tolukuma’s operator Emperor Mines Ltd subsequently announced that it planned to sell the project.
* MAC editorial note: Although Action Aid's support was important ,it is not a party to the case
Vedanta considers $2bn IPO for Indian unit
By Joe Leahy in Mumbai and Sundeep Tucker in Hong Kong
9th November 2007
Vedanta Resources is considering an initial public offering of its Indian energy unit to raise up to $2bn to spearhead its push into the country’s power sector.
The move comes as the UK-listed group is facing increasing controversy over its human rights and environmental record in India, with Norway this week dropping the mining and metals group from its $350bn sovereign wealth fund for ethical reasons.
Sterlite Energy, controlled by Sterlite Industries, India’s largest metals and mining company and part of the Vedanta group, is planning to build power projects with total capacity of 10,000 megawatts in the country.
Sterlite Industries told the Bombay Stock Exchange this week that it was considering “financing options for these projects, including the issuance of equity and incurrence of debt”.
People familiar with Sterlite’s plans said that, as part of this, it was considering an initial public offering, probably in India, to raise between $1bn and $2bn to fund the plan.
The move marks a significant diversification for Vedanta into power generation at a time when India is aggressively soliciting funding for the sector.
The government estimates India needs to invest $490bn in the next five years in infrastructure, a large proportion of which will be dedicated to the power sector. Reliance Energy, a unit of the conglomerate controlled by Anil Ambani, the Indian businessman, is planning to raise about $3bn in what will be the country’s biggest IPO.
Vedanta declined to comment on the plans for an initial public offering. In its statement, Sterlite Industries said it planned to invest in government projects and in its own initiatives.
“The majority of these projects, if awarded and approved, are expected to be commissioned over the next five years,” it said.
But Vedanta will have to deal with concerns from international investors following the move by Norway’s Government Pension Fund – Global, known as the “oil fund”, to bar investment in Vedanta, Sterlite Industries and another unit Madras Aluminium Company. Norway’s finance ministry said: “The fund runs an unacceptable risk of contributing to severe environmental damages and serious or systematic violations of human rights by continuing to invest in the company.”
Last month, thousands of Indian tribal people protested against a Vedanta alumina refinery being set up in Lanjigarh, in the eastern state of Orissa.
Vedanta on Thursday declined to comment, saying the the Landijargh case was sub judice in the Indian courts.
But the company said it upheld the highest standards of corporate social responsibility.
Copyright The Financial Times Limited 2007