MAC: Mines and Communities

Vedanta accused of illegally constructing death-dealing Indian power plant

Published by MAC on 2009-09-27

As further news of the Korba disaster emerged from India on September 25, there were official accusations that the operating company, Vedanta Resources plc, was building the fatal chimney without a legal permit.

The number of fatalities had by then risen to 36 - but the final toll will almost certainly be greater.


Press release from London Mining Network

25 September 2009

No firm death and injury count is yet available of victims in Wednesday's disaster at UK-listed Vedanta's power plant construction site in Korba, India, where a partly-built chimney collapsed on top of a hundred or more workers.

The construction was part of Vedanta's massive expansion of its aluminium complex in the north eastern Indian state of Chhattisgarh.

A Chinese engineering company, SEPCO, was commissioned by Vedanta to deliver the power plant; further work had been sub-contratced to a Mumbai-based engineering firm.

Official sources confirm that at least 36 people were killed [BBC News, 25 September 2009]. Many workers remain unaccounted for. It will take another four days for rescuers to clear the site debris, and at least two days to recover all the bodies.

A final death toll approaching one hundred (including those dying from severe injuries) seems tragically possible.

Vedanta's alleged culpability

According to the mayor of Korba, quoted by leading Indian business news daily, the Business Standard [25 September 2009]:

• Vedanta (Balco) did not have permission from the civic authorities to construct the fatal chimney

• The Korba Municipal Corporation had earlier served notices on Vedanta for "violating the norms"

• Only a week before the disaster, a team from the Corporation visited the site and then ordered the company to stop construction; however "the company started the work again."

Meanwhile, there have been several demands by trade unionists, including the Centre of Indian Trade Unions (CITU), for the re-nationalisation of Balco.

Balco was privatised to Sterlite Industries in 2001, two years before the company registered as Vedanta on the London Stock Exchange.

Bankers responsibilities

In June 2009, Sterlite Industries made a US$ 1 billion bond offering, in the form of American Depositary Receipts (ADRs). This was in order to raise capital for acquisitions and corporate expenses; and to take over the Indian government's existing 49% ownership of Balco.

Vedanta has been trying to acquire full control of Balco for several years.

In 2006, a leading Indian research body, the V V Giri National Labour Institute. indicted Balco for having broken almost all the agreements it made to protect its workforce, in the five years since the company was privatised.

Numerous accusations of breaches of health, safety, and environmental regulations at Balco's mining and aluminium production, have been made, by Indian and international organisations over the past eight years.

The book runners behind the June 2009 offering were JP Morgan and Morgan Stanley.

Several leading European and US banks are believed to have invested in the offering.

* Balco is a 51% subsidiary of Sterlite Industries India Ltd, itself the main metals and mining subsidiary of UK company, Vedanta Resources plc. The latter holds 59.9% of Sterlite. The controlling shareholder in Vedanta is Volcan Investments Ltd which is 61.95% owned by Anil Agarwal (Vedanta's executive chairperson) and members of his family.

• For further details:

telephone: +44- 20 7700 6189

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