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How big business gets away with environmental violations

By Nityanand Jayaraman

A Supreme Court committee has found that Vedanta falsified information to obtain environmental clearances and began construction on its aluminium refinery in Orissa without the necessary clearances under the Forest Conservation Act. Why doesn't the law apply equally to the rich and powerful, asks Nityanand Jayaraman

A March 2005 cartoon in Business India sums up the business strategy of UK-based mining giant Vedanta/Sterlite's founder-cum-boss Anil Agarwal. The cartoon depicts a corpulent Agarwal squeezing himself through an hour-glass saying, "In India, you must have patience. Everything will come through." The London-based billionaire's analysis of India is frighteningly accurate. Indeed, it is borne out by the fact that big business houses are constructing and operating mines and factories in blatant violation of laws. The formula for violating laws is simple: If you want to construct an illegal factory, just do it quick, make it big, and ensure that the investment is substantial.

The legal infrastructure, and judicial and political will to crack-down on blatantly illegal big investments just isn't there. Increasingly, activists and residents are hesitant to approach courts for relief. Rather than take the violator and complicit regulators to task, the courts have willy-nilly tended to permit the regularisation of illegalities with barely a rap on the violator's knuckles.

It is in this sobering context that a recent report by a Supreme Court panel on forests and wildlife has to be viewed.

On September 21, 2005, the Supreme Court's Central Empowered Committee on Forests issued a report recommending the revocation of environmental clearances given to Vedanta Alumina Ltd's 1 million tonne aluminium refinery in the Niyamgiri forests in Lanjigarh, Orissa. The CEC found that Vedanta had falsified information to obtain environmental clearances, destroyed more than 10 hectares of forest land and begun construction work onsite without obtaining necessary clearances under the Forest Conservation Act.

Hinting at the complicity of the Union Ministry of Environment and the Orissa government in the violations, the CEC has written that "The casual approach, the lackadaisical manner and the haste with which the entire issue of forests and environmental clearance for the alumina refinery project has been dealt with smacks of undue favour/leniency and does not inspire confidence with regard to the willingness and resolve of both the State Government and the MoEF to deal with such matters keeping in view the ultimate goal of national and public interest."

The CEC is unequivocal about the legality, or lack thereof, of Vedanta's investments in Lanjigarh, and the consequences that ought to follow. Referring to the Niyamgiri forests as "an ecologically sensitive area," the CEC has recommended to the Supreme Court to consider revoking the environmental clearance dated 22.9.2004 granted by the MoEF for setting up of the Alumina Refinery Plant by M/s Vedanta and directing them to stop further work on the project. The refinery project is integrally dependent on the availability of 3 million tonnes of bauxite ore annually from the densely forested Niyamgiri hills for which no clearance has been obtained. The CEC and the Orissa government acknowledge that the area is rich in wildlife, has dense forest cover and was constituted as an Elephant Reserve by the state of Orissa in August 2004.

Curiously, although Vedanta admits that the proximity of the Niyamgiri deposits is what makes the Lanjigarh project commercially viable, it has sought the delinking of the mining proposal from the refinery project. Even more curiously, the Ministry of Environment has obliged.

"Such delinking is objectionable," reports the CEC. "In the event [that], for the mining component, the environmental clearance and/or the forest clearance is rejected, the expenditure of about Rs 4,000 crore being incurred on the project will become infructuous," it concludes.

Considering the grave human rights violations committed and abetted by the state and Vedanta, CEC's 'Recommendations' and 'Observations and Conclusions' take on all the more significance. Forcible eviction of tribal families from their homes, illegal and violent take-over of private property belonging to tribals, unlawful confinement of local villagers by Vedanta security forces, and the use of police and district administration to suppress dissent - nothing short of a full-blown CBI inquiry will do to unearth the sordid details of how big business conducts itself in India.

Neither Vedanta/Sterlite's disregard for the law, nor the alleged "leniency" shown by the central and state governments to Vedanta is without precedent. In fact, the Lanjigarh scam is merely one wave in an ocean of scandals. The company, its subsidiaries and its boss Anil Agarwal have been linked to insider trading, harassment of employees, financial malpractices, illegal construction, unsafe workplaces and numerous other illegalities.

Sterlite's copper smelter in Tuticorin perhaps has the dubious distinction of being among the most illegal facilities in the region. A proposal to set up the facility in the Ratnagiri district of coastal Maharashtra had to be abandoned after farmers and fisherfolk there put up a spirited fight. Upon the invitation of the then Tamilnadu Chief Minister Jayalalithaa Jayaram, Sterlite put together a copper smelter in Tuticorin in 1995 using moth-balled equipment from the US and other countries. The proposal was pushed through without public consultation despite vociferous opposition by Tuticorin residents and political parties.

The half-hearted conditions laid down by the Tamilnadu Pollution Control Board regarding where the factory should be located, or how much it should produce were promptly violated. Instead of locating the smelter 25 km away from the sensitive coral reefs of the Gulf of Mannar marine national park as stipulated in the TNPCB's consent to establish, the company located the arsenic and sulphur dioxide-spewing smelter 14 km from one of the protected coral islands. Rather than restrict its annual production to 40,000 tonnes of blister copper as per TNPCB's consent to operate, Sterlite went ahead and milked more than 1,70,000 tonnes of copper anode from its smelter, and proudly announced its production achievements to impress its shareholders.

Operating at higher than permitted capacity, and the setting up of a number of unapproved plants within the complex seems to have had an immediate bearing on the safety, health and environmental conditions within the factory. According to workers and ex-workers, most of the occupational injuries and fatalities go unreported, and the local police and even the district administration "cooperate" with the company to cover up all but the most notorious of incidents. Between 1999 and 2004, the Tuticorin plant reportedly killed 13 people and injured 139. Criminal proceedings have been initiated in only 3 out of 15 incidents reported by workers. Ironically, the Tamilnadu government issued safety awards to the company in 1999 and 2000, during which time at least 11 people were injured, and villagers had apprehended company staff for releasing toxic effluents into a village drinking water pond.

Encouraged by the government's pliability, the company has gone ahead with an ambitious capacity expansion plan to make its Tuticorin assets more attractive to global investors. A 300,000 tonne smelter, a 127,000 tonne refinery, a power plant, a copper rod unit and an oxygen plant were all set up and were close to commissioning by September 2004 when a Supreme Court Monitoring Committee on Hazardous Wastes (SCMC) visited the plant. Not one of these units had any permits - safety, environmental, revenue or local government clearances had all been ignored.

A day after the SCMC's visit, the Ministry of Environment rushed in an environmental clearance for the new smelter and refinery. The power plant, copper rod unit and oxygen plants continue to operate without permits. Even the threat of action from the country's highest court did not daunt the company or government authorities. In April 2005, the Tamilnadu Pollution Control Board consented to the operation of the above plants despite the fact that the plants were not even permitted to be built.

Vedanta's promises to its shareholders, particularly with regard to its Lanjigarh and Tuticorin operations, were built on the company's confidence that the Indian system will condone its violations. Vedanta's house of cards may collapse if the Indian "system" should behave uncharacteristically and actually implement the law. But this possibility seems to have perturbed no one, and certainly not the company's shareholders and financiers. In the lead-up to the company's London listing, a team of 120 lawyers, bankers and engineers visited India to verify Vedanta's assets. None seem to have been able to spot, anticipate or take seriously the legal problems resulting from the company's brash violations.

At Vedanta's annual shareholder meeting in London in August 2005, a few concerned shareholders raised questions about the viability of Vedanta's Indian operations. "Preserving throughout the smile of a Cheshire cat and the cool of a well-heeled guru, Agarwal's main strategy was to agree with what his critics said. Not one of the 15 or so critical questions fired at Vedanta on August 3rd were answered," writes Roger Moody, a London-based mining industry researcher and observer.

Vedanta's violations have been brought to the notice of the Supreme Court in the Goa Foundation case highlighting the Union environment ministry's grant of post-facto environmental clearance to polluting industries, or their condoning of the operation of hazardous units without requisite clearances.

It's now exactly a year since the Supreme Court Monitoring Committee saw for itself Sterlite's violations. In these months, the company has illegally doubled its production, and cocked a toxic snook at the apex court and its monitoring committee, even while continuing its tradition of sailing close to the wind.

Unfortunately, it is not just the environment ministry or State Pollution Control Boards that consider environmental regulations a hindrance to the country's development. Even Prime Minister Manmohan Singh is guilty of encouraging flexible implementation of environmental laws and due process in the interests of expediting industrialisation. The multi-crore Sethusamudram shipping channel project, for instance, was begun less than a year from the time that it was introduced by the Congress-led government. That is record time considering the scale and environmental ramifications of the project. It was inaugurated by the prime minister at a time when the state government of Tamilnadu and the Pollution Control Board had withheld clearances pending clarification of a number of environmental and technical issues.

The Singh government has got to be the most corporate-friendly government in the history of India. The daily newspapers are agog with stories about our ministers hobnobbing with corporate CEOs.

Seen in this dismal backdrop, it is difficult to imagine that some courageous and upright institution will come forward to hold industrialists to account, or that the law will apply equally to the poor and the rich.

(Nityanand Jayaraman is an independent journalist and researcher focussing on investigating corporate abuses of the environment and human rights. He is based in Chennai, and is associated with the International Campaign for Justice in Bhopal)

InfoChange News and Features, October 2005