CORPORATE

CITIZENSHIP REPORT
ON STERLITE
INDUSTRIES INDIA
LIMITED

BHARANI SHANKAR ANGAMUTHU

BHUPESH VERMA
BHASKAR DAS
i
Z
C
a
P
u
l
A
e
v
t
&
L
S
H
h
R
g
I
Z
4
2
c
j
0
8
9
1
U
w
T
,
M
x
y
fi
i
)
O
L
A
B
(
b
o
K
P
v
ti
p
C
d
n
a
r
t
l
e
m
s
W
D
J
f
.
V
&
OVERVIEW
Corporate Citizenship report on Sterlite Industries India Limited

Sterlite Industries India Limited (SIIL), established in 1986, is the

principal subsidiary of Vedanta Resources plc, a diversified and
integrated metals and mining company, with principal operations
located in India and Australia. Sterlite’s principal operating
companies comprise of Hindustan Zinc Limited (HZL) for its fully
integrated zinc and lead operations; Sterlite Industries India Limited
(Sterlite) and Copper Mines of Tasmania Pty Limited (CMT) for its
copper operations in India/Australia; and Bharat Aluminium
Company (BALCO), for its aluminium and alumina operations and
Sterlite Energy for its commercial power generation business.
Sterlite is India's largest non-ferrous metals and mining company
and is one of the fastest growing private sector companies. Sterlite
is listed on BSE, NSE and NYSE. It was the first Indian Metals &
Mining Company to list on the New York Stock Exchange. i

The consolidated turnover for 2009-10 was Rs 24410 crores, with a net profit of 5409 crores. The four verticals
of Sterlite industries is as follows -

The group’s Executive Chairman, Anil Agarwal, is the group original promoter and founder having built the group
from its inception in 1976 and holds over 34.76 % stake in SIIL, via Twin Star Holding Ltd.

CORPORATE CITIZENSHIP
Though the primary responsibility of an organization is delivering maximum profits to the shareholders, they
have now understood the importance of contributing to society based on their business activities, social
investments. This change has been brought about by the unrelenting focus over the past few decades on the
environment, health and safety of the community and there is pressure on companies to assess and report their
social and economic impact. As a result, investors, customers and employees want to be involved with
companies who value these factors. Companies that believe in the philosophy of good corporate citizenship
should cover the following principles –





Good Corporate Governance
Environmental considerations impact decision making.
Social and Economic considerations which contribute to sustainable development
Fair work place relations

Page 1
 Corporate Citizenship report on Sterlite Industries India Limited

"Corporate social responsibility is a hard-edged business decision. Not because it is a nice thing to
do or because people are forcing us to do it... because it is good for our business" - Niall Fitzerald,
Former CEO, Unileverii

The reward companies are reaping for sustained investments in ethical business practices, philanthropy, natural
resource conservation, proactive environmental policy is in form having reputation as a good corporate citizen.
This translates to increased market share, better customer retention, improved employee morale, increased
ability to attract top employees and enhanced company image. iii

PURPOSE OF THE STUDY

Given that corporate citizenship takes into account the impact of the company on the society and environment
in which it operates, in addition to the economic impact, this study examines the corporate citizenship practices
of Sterlite Industries. The report focuses on Sterlite’s performance on categories like Corporate Governance,
Environment, Community Engagement and Employee Relations.

CORPORATE GOVERNANCE
Sterlite’s Corporate Governance report states that the company perceives good corporate practices as a key to
sustainable corporate growth and long term shareholder value creation. Also all actions and strategic plans are
directed towards delivering value to all the stakeholders, as well as conform to the highest standards of
corporate behaviour.iv

However the history of the company indicates otherwise. Sterlite and its parent, Vedanta, are involved in
numerous controversies involving labor disputes, share price manipulation, unlicensed factories and production,
and the takeover of public sector undertakings at throw-away prices. The company’s reputation also took a
beating for environmental violations in its various plants and the human rights violation during land acquisition
for new projects. There was wide spread unrest in most of the company’s greenfield ventures and takeovers,
due to improper rehabilitation and negative impact on the local tribal population.

 In 1998 Sterlite along with two other Indian companies was banned by SEBI from accessing the market
for two years, in response to an investigation for insider trading.
 Sterlite’s takeover of the state owned Bharat Aluminium Company (BALCO) in 2001 sparked the next
controversy, as the sale was made for a paltry 551 crores for a 51% stake. There were accusations of
kickbacks against the company, as BALCO was a profit making PSU with substantial cash reserves and a
captive power plantv.
 Sterlite was involved in evading massive tax liabilities in 2003, when three investment companies,
wholly owned by Twin Star, which held shares in Sterlite and Malco, expressed intent to liquidate and
transfer the assets to their parent, Twin Star. The company was indicted by the Bombay High Court, that
the transfer was done in bad faith to evade taxes and ordered authorities to recover the taxes.
 In 2006, Sterlite was one companies included in a list of major excise duty evaders vi.
 A judgment passed by the Delhi High Court, indicted the directors of Sterlite /Vedanta which was the
result of a case following an investigation of Sterlite's earlier foreign transactions. The Enforcement
Directorate (ED) concluded that the promoters (Agrawal family) illegally acquired and transferred
foreign currency amounting to 208 crore rupees without permission from the Reserve Bank of India vii.
 Many international shareholders (the Church of England, Pension fund of Norway, Martin Currie
investments, BP’s pension fund and various trusts viii) in the parent company Vedanta, disinvested from
the company citing ethical grounds and human rights violation.

Page 2
 Corporate Citizenship report on Sterlite Industries India Limited

“I understand the Indian psychology. That's my biggest advantage. In India you must have
patience; everything will come through” – Anil Agrawal

ENVIRONMENTAL ISSUES
The company states that it is reaffirming its commitment of zero environmental impact through practical
solutions. The main concern and the challenges for the company are gaseous emissions (GHG), solid waste,
consumption of energy and water. Sterlite Industries (India) Limited has won a few awards like The Greentech
Gold Award (2005 & 2006) and Golden Peacock Award (2008) for the Environment Management. In 2009
company carried out Carbon inventorisation study for the plant in Tuticorin and Silvassa plant. In another
initiative it has established a core CDM (Clean Development Mechanism) cell at plant, with 17 employees from
different departments to facilitate identification of potential projects and to facilitate and incentivize more
employee involvement in identifying various energy efficiency/potential CDM projects. Three projects under this
scheme - power generation from waste gas, LPG reduction in anode casting plant and steam generation from
waste heat recovery from sulphuric acid plant were implemented.
The company has invested in Reverse Osmosis (RO) plant, rain water harvesting and zero effluent units to
minimizing the consumption from fresh water resources. For waste management the company has a fully
developed secured landfill facility approved by the statutory body for safe storage of hazardous solid wastes.
One initiative in the field of waste management is to use the copper slag for road construction after the assent
of National Highway Authority of India Ltd. The company has also taken some steps to reduce the gaseous
pollutantsix.
The ground reality is altogether different. Sterlite has been charged with serious environmental disregards and
handling of hazardous waste. The hazardous waste management and illegal emission contaminated the soil, air
and ground water and adverse health effects in local population. The company has been involved in various
controversies.
 Sterlite’s mining plans in 2008 in Niyamgiri, Orissa raised some serious questions on the integrity of the
company and its policy. Experts from the Wildlife Institute of India have also concluded that this mining
operation will cause ‘irreversible’ changes to the local environment. The mining process would also
affect the thick forest and its habitat which can also cause drying up the water resources x.
 The company operated the Tuticorin copper smelter plant at higher than permitted capacity and setup
unapproved plants within the complex, thereby endangering the health, safety and environmental
conditions of the factory and the immediate community.
 Another group concern Konkola Copper Mines, Zambia is accused of severe charges for pollution and
environmental changes. In November 2006 spill from the plant caused the contamination of the single
water source for 50,000 people and left them with no alternative source xi.

 As per recommendation of Tamil Nadu pollution control board the Tuticorin unit of SIIL should be
established at least 25 km away from the National Park (Gulf of Mannar) but the company did not
comply. The company did not pay any heed to the recommendation regarding development of a 25
meter green belt around the plant which acts as a buffer. Also the company did not conduct any
environment impact survey as prescribed by law. The assessment made by the National Environmental
Engineering Research Institute (NEERI) declared the facility as “totally inadequate in addressing the
issue” in its 1998 report for violating fifteen environmental requirements. As a result, the plant has been
closed down on 23rd Nov 2008 after court intervention but started after one month on experimental
basis which also shows the nexus of the company officials with the government system. A July 2005
finding of the committee says that the Tuticorin unit is completely in violation of hazardous waste rules.

Page 3
 Corporate Citizenship report on Sterlite Industries India Limited

 The charges against MALCO were on the disposal of red mud, which is a residual product of bauxite
refining. This unit has caused considerable environmental impact and health burden on the local
populationxii.

“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. 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." – The Government Pension Fund (Norway) Council on Ethics xiii

COMMUNITY ENGAGEMENT AND EMPLOYEE RELATIONS

SIIL’s sustainability report states that its community initiatives are aligned with the goals of United Nation's
Millennium Development Programme and the principles of the Global Compact and are in the following areas:
 Sterlite runs evening study centres, adult education centres and offers scholarships to economically
disadvantaged students in Tuticorin.
 Sterlite organizes pulse polio immunization programmes, blood donation camps and AIDS awareness
campaigns. It has setup rural health clinics offering primary healthcare in Tuticorin and Silvassa.
 Sterlite has contributed to the coastal livelihood project (aimed at providing alternate employment
opportunities to the youth), school renovation, sanitation and drainage network construction projects in
Tuticorin.

With regards to workplace safety, SIIL states that it takes a systematic approach to managing safety and
preventing incidents - such as spills, fires and accidents. It has developed a multiple-pronged strategy of 5’E’s viz.
Engineering, Education, Enforcement, Enthusiasm, and Examples to ensure that there are no accidents.

A closer look at the figures (in terms of the amount spent) reveals a different picture.

Particulars 2006-07 (in Rs cr) 2007-08 (in Rs cr) 2008-09 (in Rs cr)
Community Development Initiatives 0.61 0.83 1.83

A substantial amount (in 2008-09) was used in two major activities:

 Paediatric Block in the Government hospital built a cost of Rs. 39.26 lakhs
 'Save A Child Heart' Programme for treating poor children ailing with heart diseases - Rs. 37.5 lakhs.

The total amount of Rs 1.83 crores is miniscule (less than 0.05% of its net profit) in comparison to its peers in
mining and metals industry. Also this pales in compaision with the amount contributed by Sterlite to political
parties, as donations (http://www.livemint.com/2008/06/27000316/Political-bet-Parties-get-big.html)

Sterlite has been accused of land grabbing for many of its projects.

 Niyamgiri Hills are the traditional lands of the Dongria Kondh, an indigenous community which is
considered endangered. The hills are rich in bauxite and SIIL wanted to mine the bauxite and refine it at
the Lanjigarh refinery. Both the company and government failed to assess the impact of the project on
local communities who live very close to the mine. The tribal communities were not invited to public
hearings on the proposed mine.

Page 4
 Corporate Citizenship report on Sterlite Industries India Limited

 During the expansion of the refinery at Lanjigarh 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 without any
adequate support from the company. The company has also abused its power by manipulating facts and
communicating the wrong message in media.
 Hindustan Zinc Ltd completed a dam on the Joi and Wakal rivers in a scheduled area, where lands
cannot be acquired without making provisions for rehabilitating. The company connived with the police
and the local politicians to forcibly acquire the land affecting more than 13500 people across 23 villages.
 BALCO has been accused of forcibly evicting the tribal communities in the vicinity of the bauxite mines
at Manipat and Bodai-Daldali in Chattisgarh. By February 2007, 3 (Kesra, Sapnadar and Bareema) of the
4 villages were taken over by BALCO. Of the 112 individuals who lost their land, only 50 have received
compensation (of Rs 12,000 per acre) from the company.
 Hindustan Zinc Ltd has not adequately compensated villagers in Rampura Aguncha, Rajasthan for one of
its expansion projects. There were several incidences like dust problems, contamination of the ground
water and blasting which caused cracks or demolition of few buildings in the villages.

With regards to employee relations, the attitude of the company has not been very good.

 Trade unions resorted to a 67-day strike (citing undervaluation of BALCO’s assets) after SIIL bought
BALCO in 2001. The court mediated settlement guaranteed no retrenchments, no retaliation against the
strikers, and back pay for the two month strike period. The company did not keep up on its
commitments and within 2 days it laid-off 2,000 contract workers citing that their contracts had expired.
While it paid two months' wages, it claimed that it was an advance and not the back pay.
 There have been allegations of hazardous working conditions and that SIIL employs contract labourers
who are not adequately trained and are cheap. Four accidents resulting in the death of 14 contract
workers have happened since SIIL’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.
 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.

CONCLUSION
Sterlite and its parent company Vedanta, attribute a lot of the controversies to a ‘perception’ problem. Also the
company has been attempting to build up on its corporate social responsibility program xiv. However the
examples cited above illustrate how a company with economic and political clout can defy the laws of the land
with impunity, infringe upon the rights of the indigenous people with illegal mining and maximize profits by
blatant environmental violations. Indulging in price rigging and insider trading, trampling upon the rights of the
employees, taking over public properties at throwaway prices; Sterlite has absolutely no value for ethics and fair
business practices. It is an example of a company where the CSR initiatives are a mask for all the unethical
activities.

Page 5
Corporate Citizenship report on Sterlite Industries India Limited

Page 6
Corporate Citizenship report on Sterlite Industries India Limited

Page 7
I
SOURCES
Company Overview - http://sterlite-industries.com/about_us/Company_Overview.aspx
ii
http://www.interpraxis.com/quotes.htm
iii
BusinessWeek – Corporate Citizenship on the Rise
iv
Sterlite Corporate Governance Report 2009-10
v
http://www.macroscan.com/cur/feb01/cur220201BALCO_Fiasco_1.htm
vi
http://www.domain-b.com/companies/companies_r/reliance_industries/20070209_industries.htm

vii
Was Sterlite involved in a money laundering racket? by Paranjoy Guha Thakurta in Current magazine

viii
http://news.in.msn.com/business/article.aspx?cp-documentid=3610604
ix
http://www.sterlite-industries.com

x
http://www.survivalinternational.org/news/3305

xi
http://www.crocodyl.org/wiki/sterlite_industries_india_limited
xii
Norwegian council of ethics recommendation
xiii
http://www.regjeringen.no/Upload/FIN/Statens%20pensjonsfond/RecommendationVedanta.pdf
xiv
http://business.in.com/article/boardroom/it-is-trying-to-rebuild-its-image-but-can-vedanta-find-its-soul/12382/1