Sterlite Industries India Limited

Company Snapshot: 

Sterlite Industries (India) Limited and its consolidated subsidiaries (the “Company” or “Sterlite”) are engaged in the businesses of mining, smelting, and refining non-ferrous metals in India and Australia. SIIL is a majority-owned subsidiary of Twin Star Holdings Limited (“Twin Star”), which is in turn a wholly owned subsidiary of Vedanta Resources plc (“Vedanta”), a public limited company incorporated in the United Kingdom and listed on the London Stock Exchange. Twin Star held 57 percent of SIIL’s equity as of Sept. 30, 2008.

Sterlite, its parent and associated companies have a checkered past and a controversial present, with intense local protests marking most of their greenfield ventures and takeovers. See "Vedanta Undermines Indian Communities", November 15, 2005, Corpwatch; and ActionAid's report titled "Vedanta Cares?". During its aggressive expansion in India, the company drew the ire of communities, including labour and indigenous peoples. See "Battle over Balco," Frontline, March 17-30, 2001, environmentalists, and Survival International's 14 May, 2008, release titled "Tribe -- Vedanta is destroying us for profit."

Statutory submissions by Indian political parties to the Central Election Commission reveal that the company donated generously to campaign funds for both the Indian National Congress and its rival BJP, a Hindu right-wing political party. The company has escaped unscathed despite serious controversies, including accusations of insider trading and of setting up entire factories with no statutory permission.

Its controversial copper smelter in Tuticorin was named for numerous violations including deaths and injury of workers, groundwater pollution, illegal expansion, and increasing production without license. It is listed in the Bombay Stock Exchange and the National Stock Exchange.

Number of employees worldwide: 
12,845
Chief executive officer: 
Kishore Kumar
Tel: 
+91 461 6612591
Fax: 
+91 461 2340203
Net Income: 
1,064,600,000
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Corporate accountability
Accountability overview: 

Sterlite and its parent, Vedanta, are named in numerous controversies involving labor disputes, share price manipulation, environmental pollution, unlicensed factories and production, and the take over of public sector undertakings at throw-away prices.

Tax issues: 

In 2006, Sterlite Industries was one among many companies named for tax evasion. In a December 2006 statement to the Lok Sabha (India’s lower house of parliament) Minister of State for Finance S.S. Palanimanickam included Sterlite on a list of “major excise duty evaders who have evaded more than [Indian rupees] 25 crores [$5 million at $1 = rupees 50]" over a three-year period ending November 2006.

In 2003, the Bombay High Court ruled that a case involving transfer of Sterlite Industries' shares, and Vedanta group company MALCO's shares, to Twinstar -- Vedanta's Mauritius-based subsidiary -- was a sham. The three investment companies, wholly owned by Twinstar, which held shares in Sterlite and Malco, expressed an intent to liquidate and transfer the assets to their parent, Twinstar. The investment companies followed all procedures and obtained statutory clearances for converting the Sterlite and Malco stock-in-trade to investments. However, acting under the advise of Twinstar, the investment companies ended up evading massive tax liabilities.

The Bombay court ruled that even though due process of law may have been followed, the intent of converting Sterlite shares from stock-in-trade to investment was done in bad faith to evade taxes. The Court ordered authorities to recover the taxes.

The three investment companies started winding up operations and liquidators were appointed. The liquidators applied to the concerned commissioners and obtained NOC for the three investment companies. After approval by the Foreign Investment Promotion Board and the Reserve Bank of India on Feb. 16, 2001, the petitioner-company was registered as a beneficiary of the shares held by Deutsche Bank as depository participant.

Sterlite Industries' associate company, Sterlite Optical Technologies Ltd (SOTL), now known as Sterlite Technologies, has separately been hauled up for excise evasion and fraud. In what The Times of India newspaper called "one of the biggest-ever penalties for central excise evasion and fraud, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, in 2005 upheld a penalty of Rs 84.33 crore imposed on SOTL, Aurangabad, by the Central Excise Commissionerate." The total recovery from SOTL is pegged at (Indian Rupees) Rs. 228 crore ($460 million). ["Tribunal Upholds Recovery from Sterlite." 29 June, 2005. The Times of India.] As of February 2009, the case is pending adjudication.

Labor: 

In March 2001, Sterlite bought BALCO, a profitable public sector aluminum company, at a throwaway price of $110 million [Indian Rupee 550 crores at Rs. 50 = $1]. Trade unions representing the 7,000 BALCO workers vehemently opposed the sale on grounds that BALCO assets were grossly undervalued, and that the privatization hurt worker interests. After a 67-day strike, the leadership of all the involved unions abandoned the strike accepted a court-mediated settlement with the new Sterlite management. The settlement guaranteed no retrenchments, no retaliation against the strikers, and back pay for the two months workers were on strike. The company reportedly reneged on its commitments within 2 days of signing the settlement. It laid off 2,000 contract workers claiming that their contracts had expired. While it paid two months' wages, it claimed that the money was an advance, rather than back pay for the strike period.

CITU, one of the trade unions at Sterlite subsidiary Balco, reports hazardous worker safety conditions at the company's plant in Korba, Chattisgarh. CITU mentions four accidents involving the deaths of 14 contract workers since Sterlite’s takeover of BALCO.

On 23 September, 2009, a chimney that was under construction at a coal-fired thermal power plant at Balco's facility in Korba, Chattisgarh, collapsed over 100 workers. At least 22 people were crushed to death.

Worker safety at the company's copper smelter in Tuticorin, India, has also been a serious issue. On Aug. 30, 1997, a series of explosions at the smelter ripped the lid off the rotary holding furnace, spewing molten metal on two workers. Workers report that only skeletal remains were recovered. The company said the explosions were sabotage. No investigations were pursued.

In 15 incidents between 1996 and 2004, at least 139 people were reportedly injured and 13 died. Only three of the 15 incidents have sparked the legally mandated inquiries. Most of the incidents and fatalities are not even reported, according to workers. Company management denies these allegations.

In 2001 the British Safety Council awarded Tuticorin smelter a 5-star rating for its and safety management system.

In September 2008, a boiler blast in Sterlite subsidiary Hindustan Zinc Ltd's Chittorgarh, Rajasthan smelter claimed the lives of two contract workers. See "Mishap in HZL Refinery Boiler Claims Two Lives", Times of India, 5 September, 2008.

Environment and product safety: 

In a pitched battle against primitive tribespeople -- the Dongria Kondhs -- environmentalists and human rights activists over rights to mine the sacred Niyamgiri hills for bauxite, Sterlite has managed to swing all Government and judicial decisions in its favour in the face of adverse reports, including by the Supreme Court's own Central Empowered Committee on forests. A copy of the report of the CEC is attached below. The project, initially floated by Sterlite, was later taken on by Vedanta Alumina, a company in which Sterlite has a minority stake. In 2007, the Supreme Court temporarily put the brakes on Vedanta Alumina's report after reading a highly adverse report by the Norwegian Council of Ethics (also attached below). Curiously, the Supreme Court stopped Vedanta Alumina from pursuing the mining proposal in light of the massive human rights and environmental violations alleged in the Norwegian report by its namesake and parent Vedanta. However, the Supreme Court itself asked the petitioner to return with a proposal by non-party Sterlite. This despite the fact that Sterlite is one of the key "violators" of environmental and human rights, and the law in the Norwegian report. The project is set to destroy the livelihood base of the Dongria Kondhs, disturb the sanctity of Orissa's last remaining patches of thick jungle and elephant habitat, and dry up the water sources, particularly the rivers Vamsadhara and Nagavalli. In a now infamous August 2008 judgment, the Supreme Court of India allowed Sterlite to mine the sacred hill Niyamagiri. A copy of the Supreme Court order is below.

What began as a proposal for a 2 million tonne per annum aluminum refinery will now be expanded to 5 mtpa at the Lanjigarh site in Kalahandi district of Orissa. More than 118 families from 7 villages were evicted to make way for the refinery, and 1236 families belonging to 27 villages have lost lands to the project.

On 25 April, 2009, a statutory public hearing was held for six-fold expansion of the smelter in Lanjigarh amidst massive police security for the company. Local witnesses report that despite massive opposition to the project to the point that the public hearing had to be abandoned due to it, Sterlite has reportedly circulated news in the media that the locals consented to the public hearing.

Sterlite subsidiary Hindustan Zinc Ltd's zinc-lead mines in Rampura-Aguncha, Rajasthan, is named as a big polluter by local agrarian communities. The Rampura Aguncha Mines Affected Farmers Association, representing farmers and cattle-herders, have complained to various authorities on a number of counts: a) that blast-mining is leading to cracks in the houses; b) that dust pollution is harming health, and contaminating food and water; c) that mining has led to a serious depletion in groundwater level leading to increased cost of agriculture and decline in agricultural output. d) that mines have expanded into village grazing lands and common lands, depriving cattle of their sole source of fodder, and herders of their sole source of income.

According to a February 9, 2009, newspaper report, Sterlite is poised to takeover the bankrupt US copper major Asarco. Asarco is plagued with lawsuits against the company's environmental degradation. The articles in the newspaper Livemint.com says "While Sterlite will be ring-fenced from the existing environment-related lawsuits, the fact that it would operate in a developed country may make it susceptible to similar lawsuits in the future." See The LiveMint article titled "Sterlite Shares Rise on Acquisition Talk", February 9, 2009.

Sterlite operates a copper smelter in Tuticorin, Tamilnadu, barely 15 kilometres from the Gulf of Mannar Marine Biosphere Reserve -- a coral, and sea-grass rich area famed for its rich fisheries and dugong habitat. The company's setting up and operation has been marked by serious irregularities that expose the complicity of regulatory bodies, scientific agencies, and district administration officials. Records unearthed by activists using the Right to Information Act, 2005, reveal that the company has received numerous warnings for violations, but no action was taken, and that the company had consistently produced, and continues to produce, well beyond its licensed capacity. Records also indicate that Sterlite set up entirely new production facilities without any license to set them up. The fact that these were brought to the notice of the Supreme Court without effect casts a shadow of doubt over the integrity of the apex court. [Read attached report titled "Sterlite Case Study, Final, 14.12.2008.pdf"]

Political influence (national and international): 

Sterlite Industries, by itself, or through its parent or the Public and Political Awareness Trust, has been a major contributor to political campaign funds of the two key national political parties -- the Bharatiya Janata Party (BJP) and Indian National Congress. Between 2003 and 2007, Sterlite-Vedanta gave Indian rupees 95 million ($2 million) to the Hindu right-wing BJP. During the same period, the company gave Indian rupees 10 million ($200,000) to the Congress party, the leading constituent in the ruling United Progressive Alliance.

The company's parent Vedanta Resources Plc has been named for its closeness to India's erstwhile finance minister and current (January 2009) home minister, P. Chidambaram. In 2006, several political parties in the parliament criticized Chidambaram for serving as a director of Vedanta in 2003, when he reportedly drew $70,000 annually as a non-executive director on the company's board. R. Poddar, author of the now-banned book Vedanta's Billions, claimed that Sterlite stocks rose 1,000 percent in 2003, when Chidambaram was on the board.

Social responsibility: 

In 2007, the Norwegian Council of Ethics advised the Norwegian Government to withdraw its pension fund investments in Vedanta Resources -- SIIL's parent company. The Council's recommendations are telling about the cultural ethos prevalent in Vedanta and its subsidiaries. According to the report (available as attachment below): "The Council finds that 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. 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. As described in Chapter 5, the violations against the environment and human rights that have been revealed are recurrent at all the subsidiaries subject to investigation and have taken place over many years. In the Council’s view, they indicate a pattern in the company’s practices where such violations are accepted and make up an established part of its business activities. Such a pattern of conduct constitutes an unacceptable risk that the company’s unethical practices will continue in the future. After an overall assessment the Council finds that the criteria for severe environmental damage and gross or systematic human rights violations have been met in this case."

Fraud
In February 2009, Maytas Infra filed a criminal case against Vedanta Aluminium Ltd, a company in which Sterlite had 29.9 percent shares as of September 2008, for fraudulently en-cashing bank guarantees deposited during the contract for construction of Vedanta's new township in Orissa. As of Septembee, 2008, Vedanta Aluminium is 70.5 percent owned by Sterlite's parent Vedanta Resources Plc.
Subsidiaries
Copper Mines of Tasmania Pty Ltd, or CMT, Thalanga Copper Mines Pty Ltd, or TCM, Bharat Aluminium Company Limited, or BALCO, Sterlite Energy Limited, or Sterlite Energy, Sterlite Opportunities and Ventures Limited, or SOVL, and Hindustan Zinc Limited, or HZL. (As of 23 February, 2009)
Assets and Locations
Sterlite operates a vertically integrated copper complex, including copper mines in Tasmania, a copper smelter-cum-rod plant in Tuticorin, Tamilnadu, and a copper cathode-cum-rod plant in Silvassa, in Western India. (As of 23 February, 2009)
= Tuticorin Complex: =
Smelter: 400,000 TPA Copper anode Refinery: 205,000 TPA Copper cathode Rod Plant: 90,000 TPA Copper rods Sulphuric Acid Plant: 1,300,000 TPA sulphuric acid Phosphoric acid plant: 180,000 TPA phosphoric acid
= Silvassa Complex: =
Refinery : 195,000 TPA Copper Cathode Rod plants : 150,000 TPA Copper rods
= Mt Lyell Mines, Tasmania: =
Copper ore reserves: 14.2 million tonnes
Financial information
Stock ticker symbol: 
SLT
Fiscal year: 
2008
Major lines of business/segments: 

copper, aluminum, zinc, lead, silver, electricity

AttachmentSize
Vedanta Action Aid report.pdf378.41 KB
Norwegian Council of Ethics recommendation Vedanta.pdf355.49 KB
Vedanta Order Supreme Court India 8.08.2008.pdf105.03 KB
Central Empowered Commn Report on Vedanta Niyamagiri Sep 2005.pdf240.22 KB
Sterlite case study, FINAL, 14.12.2008.pdf269.61 KB