The Great Smelting Pot: Coming A Copper

Nothing, besides sympathy for a supposedly lofty cause—Tamil Eelam—has in the past united George Fernandes of the Samata Party and Vaiko Gopalasamy of the mdmk as solidly as antipathy towards a more mundane object—Sterlite Industries (India) Ltd. Support for Eelam has seen the two share a common platform frequently—most famously in December 1997, when a defiant Fernandes hosted an "international conference" on the lawns of his bungalow in Delhi against official advice to the contrary. The conference scarcely hid its strongly pro-ltte agenda.

Less famously, but more honourably, anti-Sterlite protests brought them together many times in the late '90s. In August 1997, for instance, they jointly launched an agitation in Tuticorin to demand the permanent closure of Sterlite's "accident-prone" copper smelter. Fernandes on August 25 "inaugurated" an indefinite fast by Anton Gomez, the Samata's Tamil Nadu general secretary and also convenor of the National Trust for Clean Environment (ntce). Five days later, Vaiko courted arrest in the same cause, with 1,600 others.

Both vigorously attacked the Centre for "colluding" with Sterlite in letting it carry on its "nefarious polluting activities" which by then had begun to threaten Tuticorin's artisanal fisherfolk. Like the ntce, Vaiko himself moved a writ petition in the Madras High Court to demand that the plant be shut down for good.

Today, there isn't a squeak out of Fernandes or Vaiko though the same Sterlite faces widespread protest for its takeover of 51 per cent equity in (and full management control of) the public sector Balco in a super-controversial, Rs 552-crore deal.

It is a safe bet Fernandes-Vaiko won't join those who demand the deal's annulment after sebi on April 19 formally declared Sterlite (with bpl and Videocon) guilty in the infamous "insider trading" scam of 1998 and barred it from accessing the capital market for two years. This is the severest indictment by the market watchdog yet of corporate manipulation of share prices to defraud investors.

Sterlite's blacklisting by a statutory authority undermines the rationale of the Balco deal. A management unworthy of public trust can't be worthy of state respect nor expected to husband public resources responsibly. As important, if Sterlite/Balco can't raise funds from the market, nothing remains of the argument that the state must sell Balco as it lacks resources to modernise/expand it, which only a private buyer could mobilise.

Meanwhile, Sterlite's record remains unaltered. But the government hasn't even tried to "sweeten" the deal with an EU-style package of "model" transparency, political consensus, shares for employees and guarantees of socially responsible future conduct. Disinvestment minister Arun Shourie has made a purely formal distinction between Sterlite and Balco accessing the market, though their sebi-indicted management is identical and three Sterlite directors are being prosecuted for fraud and more. But the central issue has more to do with elementary morality, economics and politics than formal legality.

An equally important concern is Sterlite's record as a company that has sailed close to the wind, besides being involved in the insider trading scam. In March 2001, the Enforcement Directorate confirmed to the Delhi High Court that Sterlite along with other companies in the Reliance, Tata and Essar groups violated the conditions under which they raised External Commercial Borrowings (ecbs) aggregating $1.7 billion. Sterlite's share was $81 million. These companies had failed to repatriate the proceeds to the country within the stipulated period, following which the rbi and finance ministry had to intervene and force them to do so. ecbs allow companies to borrow from foreign capital markets at rates of interest which are 3 to 5 per cent lower than in India. Many abuse the money to play the market and make a killing.

That's not all. Sterlite's environmental record is truly indefensible, indeed deplorable. The company runs a highly polluting copper smelter at Tuticorin, at the tip of the Tamil Nadu coast, in an ecologically sensitive zone. The smelter has attracted serious criticism from independent environmental experts including Greenpeace International, the Tamil Nadu Pollution Control Board (tnpcb) and neeri (National Environmental Engineering and Research Institute), itself part of the csir.

Sterlite first tried to establish the smelter at Ratnagiri in Maharashtra. It even started construction in 1993-94. However, it had to beat a retreat under a groundswell of protest by environmentalists and experts. Sterlite's management then went around to sound out other states for locating the smelter—till it found a willing collaborator in the Tamil Nadu government in 1995-96.

The Tuticorin smelter violates the Coastal Zone Regulations and Tamil Nadu industry siting guidelines which state no polluting factory should be located within 25 km of a sensitive coastal area. The Sterlite plant is 16 km from the sensitive Gulf of Mannar which has been declared a Marine National Park.

The smelter is a major source of toxic pollutants like arsenic, oxides of sulphur and heavy metals such as iron, bismuth, antimony and lead. According to experts appointed by the Tamil Nadu government and the Madras High Court, the plant lacks adequate equipment to control and treat the effluents or emissions and reduce their toxicity down to permissible levels. It also lacks a proper or safe slag and waste disposal facility.

Sterlite was given conditional clearance to set up its copper smelter in January 1995 by the (central) ministry of environment and forests and in May 1995 by the tnpcb. But an investigation by neeri at the behest of the Madras High Court concluded in 1998 that both central and state approvals were granted to the plant "in contravention" of the relevant statutory requirements and on the basis of an "inadequately prepared" environmental impact assessment.

neeri noted numerous problems with different functions of the plant such as non-monitoring of certain emissions, venting of toxic gases, inefficient operation of the effluent treatment plant, excess generation of waste water, unsatisfactory methods of dumping into a pond, etc. Analysis of water samples showed an excess of dissolved solids including arsenic, sulphur, selenium, lead, cadmium, magnesium, etc. neeri recommended that water for drinking and agriculture "should be accorded higher priority" than water for industry.

NEERI found Sterlite guilty of "violations of existing laws, regulations and rules on environmental protection". It recommended the closure of the plant "till all elements of environmental and disaster management plans arising out of an objective, scientific and comprehensive Environmental Impact and Risk Assessment study are assiduously implemented". The recommendation included "revocation of the clearances". The court accepted the recommendations in November 1998 and shut down the plant's operations.It has since reopened. But there's been no independent third party assessment of Sterlite's compliance with stipulated conditions.

Yet, the plant remains accident-prone. Its core is old, obsolete and reconditioned. On July 5, 1997, there was a toxic gas leak from the plant which resulted in the hospitalisation of 100 people working in its vicinity. A health survey found high copper content in victims' blood, well above the normal range of up to 522 microgrammes/litre. Even before any remedial action could be taken, there was yet another blast on August 31, 1997, during which molten copper and slag at 1,200º C spilled out. This resulted in the death of two workers. Yet again in April 1998, there was an accident resulting in burn injuries from an effluent discharge pipeline. Six workers were affected, one of whom died. Yet again, in November 1998, a sulphuric acid leak in the plant injured five workers.

Meanwhile, three sets of writ petitions, including Gomez's and Vaiko's, are still pending before the Madras High Court. And Balco's fate hangs in the balance—despite sebi's clinching verdict.