MAC: Mines and Communities

London Calling probes the home affairs of an Indian minister - and the company he keeps

Published by MAC on 2009-11-30
Source: Nostromo Research

Vedanta on Trial (2)

P Chidambaram, India's Home Affairs Minister since late 2008, is arguably the most powerful Indian politician. Not because he "sways the masses" either in villages or towns. (In the interview quoted below, he claims to wield far less influence on decisions made at individual state level than many think he does - or should).

Rather, Chidambaram is fast being recognised as the sharpest intellectual force behind the project to thoroughly "modernise" his home country. He also holds court in some important international forums; and he seems able to mollify a few vociferous domestic critics, thanks to the breadth and depth of his knowledge and experience.

Despite early nurturing as a socialist trade unionist, by middle age Chidambaram was on a backward path, just like numerous "revolutionaries" who raised their flags in the sixties and seventies; he became a convinced advocate of free market capitalism. (Britons have observed a similar trajectory during the last 12 years, as the old Labour party offered itself up on the altar of Blairism).

Some ingredients of Chidambaram's early commitments do appear still intact. (For example he says he rejects the creation of neo liberal special economic zones). But, when you scrutinise the decisions this 64 year old has made since turning forty, there's little doubting his fundamental objective. He wants to transform India into an industrialised society on quasi-western lines; declaring as much last year in an interview with the English-language, left-leaning, Tehelkar magazine:

"My vision of a poverty-free India will be an India where a vast majority, something like 85 percent, will eventually live in cities." [Tehelkar, 31 May 2008]:

Home-bred "terrorism"

A year on, and Chidambaram has given another lengthy interview to Tehelkar [21 November 2009]. See:

In this interview PC makes great play of his intention to "peacefully" resolve the recent massive upsurge of civil violence in India's central-eastern rural areas. Yet he discounts the significant responsibility he himself bears for unleashing state-sponsored attacks ("terrorism" isn't too strong a description) against so-called Naxalites or Maoists - ones which have resulted in the killing and wounding of many non-combatants.

The most recent of these occurred on November 20 2009, when police opened fire, killing three people participating in an unarmed rally by Orissa Adivasis (Indigenous Peoples) who were seeking to reclaim their filched territory. [Statement by Campaign for Survival and Dignity, 24 November 2009].

True, Mr Chidambaram has now put himself on record as "prepared to request the Prime Minister to freeze all... MOUs [Memorandums of Agreement with private companies] and order a comprehensive review of all the MOUs that have been signed in Jharkhand, Chhattisgarh, Orissa and South Bihar." This is encouraging so far as it goes. But that would seem to be back to the government, in order that it can decide "which MOU should be implemented, with or without modification."

So, not much hope there.

Achilles heel?

Shoma Chaudhury, the journalist who interviewed the minister for Tehelkar, fairly successfully exposes Chidambaram's hitherto-unqualified support for mining. Much of the bloody warfare he claims to eschew centres around the seizure of mineral-rich territory from farming communities who strenuously resist surrendering it. And Indian mining companies (notably Tata and Essar Steel) have benefited from, if not actively supported, recent bloody interventions by state-backed forces.

However, it's the Home Minister's role in promoting London-based miner, Vedanta Resources plc (which on numerous occasions has escaped penalties for violating Indian laws) that may prove his ultimate Achilles Heel.

Chidambaram qualified as an MBA at Harvard's prestigious Business School in 1968 - incidentally a year of unprecedented European student-worker revolts against their governments. But what really marks him out is his acute legal mind. Unfortunately (in common with former British prime minister, Tony Bliar, who also trained as a lawyer) PC has employed his gifts largely to back corporate enterprises; not to enable aggreived social movements to better access their constitutional rights.

He advised the ill-fated US energy corporation, Enron, when it tried extending its criminal reach to India during the nineties [Frontline, Mumbai, 11 August 1995].

Then, in 2003, he represented Sterlite Industries (Vedanta's Trojan horse into the London Stock Exchange) before the Mumbai High Court, when it faced charges of avoiding customs duties and tax evasion [See accompanying story "Vedanta on Trial (1)" -].

Shortly afterwards, PC became a director of Vedanta itself under the executive chairpersonship of the notorious Anil Agarwal. Chidambaram only surrendered this position on 22 May 2004 - just a day before taking up the position of Finance Minister in the Congress-Left UPA central government. (Actually, Vedanta Resources' then-chairman, Brian Gilbertson, informed shareholders in June 2004 that Chidambaram resigned from the board "following his appointment as Finance Minister in the new Indian Government" [Vedanta Resources plc Annual Report 2004, page 5, our italics.]

While still in that key post, P Chidambaram sanctioned Vedanta-Sterlite's controversial takeover of the premier iron ore exporter, Sesa Goa, in April 2007 [See:]

A tangled plot

The Home Affairs Minister's involvement with the UK company provided a tangled sub-plot to an expose of the company's alleged fiscal crimes, published in 2006 by Mr Rohit Poddar of California.

Called "Vedanta's Bi££ion$" (sic), this self-published work bears the subtitle: "The Inside story: How Anil Agarwal built a fortune by listing this company on the London Stock Exchange and Manipulating Stocks in India". (We have been informed that the book is now banned for distribution in India, but there's no evidence Chidambaram prompted the ban).

Poddar's exegesis suffers from some lack of credibility, given the absence of many key references. However, the author includes a telling letter, addressed by him to Chidambaram in early 2006. Poddar asks the then-Finance Minister why he failed to take any action "against the dealings of Sterlite Industries in 2003 to ramp up the value of the company in India and then raid the LSE with impunity" [Podder to Chidambaram, 14 January 2006, in " Vedanta's Bi££ion$", page 76].

Specifically, Poddar accused Agarwal of using two Sterlite funding vehicles, Twinstar Holdings and Volcan Investments, to "raid...the market for his own gains and not in the interests of the Nation."

Unsurprisingly, Chidambaram didn't deign to answer the allegation; no doubt others also considered them ill-placed, if not ill-founded, at the time. After all, the UK's Financial Services Agency (FSA) had supposedly investigated Vedanta's antecedents and financial records prior to the London Stock Exchange (LSE) listing in late 2003, and found little amiss. (More likely, the FSA chose not to divulge any misgivings it might have had. The London Times of December 10th 2003 quoted a London stock exchange source confirming that Vedanta's listing had succeeded "only after a 'quiet word in many ears'". []. And the Financial Times' columnist, Lex, on December 5th pointedly observed that "Sterlite has a complicated structure and a chequered corporate governance history"- for which we might reasonably read: "a bewildering structure and a highly dubious reputation.")

Silence in court?

However, on March 31st this year, allegations re-surfaced in Delhi's High Court that Sterlite's prime movers - Anil Agarwal, brother Naveen and father D P Agarwal - had, between 1993 and 1999, illegally acquired and transferred foreign currency amounting to around US$420 million without permission from the Reserve Bank of India. The Agarwal clan was also accused of having"gifted" just under US$47 million to their holding company, Twinstar.

In 2002, following an investigation of these transactions, India's Enforcement Directorate (ED) found the Agarwals guilty of serious violations of the country's Foreign Exchange Management Act (FEMA). Two years later, in August 2004 (nearly nine months after Sterlite re-invented itself as Vedanta on the LSE, and three months after Chidambaram took up his role as India's Finance Minister), the ED imposed a smacking US$ 70 million penalty on the accused. [See: "London Calling asks if Vedanta's guilty of a massive money laundering racket": ]

The Agarwals lodged an appeal against this judgment, refusing to deposit the penalty until the case was resolved. However, the judge in the March 31st High Court hearing ruled that they should pay up now.

On July 20 2009, the case returned to the court. (Coincidentally, this came just four days after Sterlite raised over US$1.5 billion through issuing ADRs - American Depository Receipts - on the New York Stock Exchange.In a submission to the US Securities Exchange Commission (SEC), the company stated that "third party" claims, amounting to US$94.5 million as of the March 31st hearing, were not being recorded as a liability. Cravenly endorsing this erroneous statement were the US investment banks, JP Morgan and Morgan Stanley, whose job it was to evaluate Sterlite's financial risks). The July hearing was adjourned thrice, finally to be entertained last month.

Curiously, in the meantime, the hearing judge was replaced - and so was Mr Sanjay Katyal, the "advocate on record" who had appeared earlier to put the case for the Enforcement Directorate. Katyal is described by Delhi journalist, Paranoy Guha Thakurta, as having "a reputation for integrity, honesty and diligence." His replacement was Sachin Datta who, according to Thakurta "happens to have been a briefing counsel for a time when [Chidambaram] was practicing as a lawyer and was also serving on the board of directors of Sterlite, that is, before he became Union Finance Minister in May 2004." [Paranjoy Guha Thakurta, "Vedanta's Questionable Resources", Current, 2 November 2009].

"Two important questions remain unanswered", comments Mr Thakurta: "Is pressure being exerted on officials of the Enforcement Directorate by an invisible hand outside the Ministry of Finance? Is the Prime Minister and Finance Minister (FM) Pranab Mukherjee aware of the circumstances under which lawyers have been replaced in this money-laundering case at a time when prominent political leaders (including the FM) are waxing eloquent on the need to bring back the illegal funds that have been stashed away by Indians outside the country?"

Good questions.

Now, it may sometimes seem that there are almost as many conspiracy theories circulating in India as members of its population. (Mind you, this could demonstrate a healthier civic consciousness among Indians than prevails in the UK, where companies like Vedanta and British Aerospace get away with daylight robbery, but few citizens seem to be outraged.)

London Calling doesn't seek to link P Chidambaram directly with any suspect manoeuvres in the present High Court case. Nonetheless, he's done nothing to counter an increasing elision between India's judiciary and its executive - something that jeopardises the quality of justice meted out on behalf of its poorest citizens.

Last month it was revealed that Justice S H Kapadia - next in line for the post of India's Chief Justice - held shares in Sterlite, even while he was hearing the critical Nyamgiri-Lanjigarh case, mounted at the Supreme Court's Central Empowerment Committee hearings. Kapadia had then ruled for the company, critically shifting the balance in favour of this much-censured project. He claims to have informed lawyers for both parties about his shareholding, offering to "recuse" himself from the case, but that no one objected. ["SC judge fumes over conflict of interest allegation", Dhananjay Mahapatra, Times of India, 6 October 2009]

To pay Kapadia some due, he has since withdrawn from hearing two further cases; one of which concerned Vedanta-Sterlite's acquisition of iron ore giant, Sesa Goa.. ["Justice Kapadia recuses himself from ITC Case", Times of India, 17 November 2009]. But the judicial system still depends on such initiatives for withdrawal being taken by individual lawyers, many of whom are reluctant to challenge the "old boys' network" on which they depend.

A Sustainable Blueprint for Indian mining - or just a free hand?

Asked this month, by Tehelkar's Shoma Chaudhary, to provide a "more equitable and sustainable" blueprint for Indian mining, Chidambaram's response was, to say the least, disingenuous.

He maintained that "every single concern [mentioned by the interviewer] is already accommodated under the present law. No one can mine unless a mining plan is approved by a competent authority. How much you can mine, how you'll restore the land, how much you'll be taxed, all these things are stipulated and worked out."

In fact, the sorry history of Vedanta in Orissa demonstrates the exact opposite: the company's mining plan for Nyamgiri, and its construction of the associated Lanjigarh alumina refinery, was allowed to proceed "on the hoof" as it were - and in clear violation of strictures made by a Supreme Court sub-committee.

The Home Affairs Minister blames such abject failures on "the executive", claiming that: "People get away with impunity by cheating or bribing or violating the plan because the executive is weak."

But, just who is the executive in all of this (and many other) instances? It's not some dingy little office in a backwater of Orissa or Chhattisgarh, but the Ministry of Environment and Forests in Delhi.

And it is the Home Minister's official duty to "ensure that the government of every State is carried on in accordance with the provisions of the Constitution", while "enforc[ing] the rule of law and provide timely justice."

Perhaps the most telling indication of Chidambaram's "vision" of a future India, accompanied by an enormously increased dependency on mining, comes in response to Ms Chaudhury's  assertion that "private companies, both Indian and international, are literally bleeding the land for private gain."

Chidambaram concedes "there are bad examples" and "we have to find a model where mineral wealth can be exploited without detriment to the environment and without affecting the livelihood of the people." Nonetheless, he backs a policy under which private companies must access 70 percent of land directly, while only then "can the State intervene to take over the remaining 30 percent."

Ironically, when asked to show examples of communities unequivocally benefiting from mining, Chidambaram mentions just one: the Neyveli lignite mine in the southern Indian state of Tamil Nadu.

India's "lost years"

The irony lies not so much in the reality that "constructing" Neyveli required the relocation of a considerable number of farmers; is still plagued by the consequences of mining below the water table; and evinces high levels of ambient air pollution.

It's the fact that the mine is, and always has been, state-controlled. Neyveli was Pandit Nehru's flagship project for a new India, formally inaugurated in 1957. Undoubtedly it has provided social security and other benefits for three generations of workers and their dependents (This author has spent pleasant times with members of all three).

Yet this is precisely the type of mineral enterprise now precluded from the free- trading, privatised India, towards which Mr Chidambaram seems so eager to drag a billion of his largely- resistant fellow citizens.

Two years ago, P Chidambaram delivered the Mahindra Lecture at his alma mater, the Harvard Business School. He was following directly in the footsteps of Indian defence minister, Pranab Mukherjee, who gave the inaugural lecture in 2006 [Business Standard, 28 November 2006]. (This is the same Mr Mukherjee who, as India's current Finance Minister, has some oversight of the Sterlite money-laundering case).

In his own Harvard address, Chidambaram dubbed the three decades following India's independence in 1947 as the "lost years", during which the nation's economy "was directed by the government and closed to the outside world - with abysmal results."

It wasn't until 1991 - so PC claimed - "that the majority of people embraced the concept of an open and competitive economy as the means to a better future."

So it's somewhat puzzling to find him now citing the Neyveli mine as a benchmark for good mining, when that very enterprise benefited from India's nationalisation policy which operated (if fitfully) during most of those allegedly "lost years."

It's also highly disturbing that he was trying to enlist the "majority" of his fellow citizens in a political project that many millions of them clearly repudiate.

To his October 2007 US business audience, Chidambaram presented the picture of his nation "fac[ing] the challenge of leveraging [our] huge natural and human resources to ensure rapid economic growth."

He asserted that: "Attempts to make quick and efficient use of resources such as coal, iron ore, bauxite, titanium ore, diamonds, natural gas, and petroleum are thwarted by local state governments and interest groups."

And he went on to claim that: "The laws in this [regard] are outdated", while "Parliament has been able to tinker (sic) [with them] only at the margins." ["India's Finance Minister delivers Mahindra Lecture at Harvard Business School:,Address on challenges of development", co-sponsored by Harvard South Asia Initiative, Harvard Business school, HBS website, 5 November 2007.]

Now that, surely, was a thinly-veiled threat to interfere with constitutionally-established rights?

Whether Chidambaram still wants to do this - or, on the contrary, will deliver on the promises he recently seemed to make in Tehelkar - is widely open to question.

If P Chidambaram truly upholds India's constitution, he could start by repudiating the actions of one of India's worst corporate offenders of its laws.

[London Calling is published by Nostromo Research. None of the opinions expressed in this column are necessarily held by any other party, including the editors of this website. Reproduction is welcomed, so long as full acknowledgment is given to Nostromo Research, and any sources quoted in this article.]

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