Vedanta Resources holds its 2012 AGM

Published by MAC on 2012-09-04
Source: The Guardian, Independent, Times of India et al

And the sparks fly!

Protesters challenge Vedanta on human rights

Simon Goodley

The Guardian

28 August 2012

Mining group accused of environmental and human rights breaches in India by Amnesty International

Protest at Vedanta AGM 2012

Campaigners highlighting environmental and human rights breaches by mining group Vedanta Resources have been intimidated by police forces and subjected to trumped up charges, it was claimed on Tuesday.

The allegations were made by the human rights campaigners Amnesty International at the FTSE 100 group's annual meeting, which was notable for requiring its own police presence as well as for the dissenting voices from City fund managers in addition to the protest groups.

An Amnesty report claimed: "An ongoing inquiry by India's Human Rights Commission [has found] that the police in both the framing of false charges and the suppression of dissent have acted to promote the interests of the company".

Amnesty's Peter Frankental asked the meeting: "Do you take these findings and allegations seriously and what are you going to do about them?" After a testy exchange, Vedanta non-executive director Naresh Chandra said: "Give us the information and we will have it investigated".

Shareholders supportive of the management frequently clashed with critics of the company's record on human rights, safety and the environment.

Standard Life Investments, which holds 9m Vedanta shares, said it would abstain on the re-election of members of the nominations committee because the board contained too few independent directors.

Aviva said it was "pleased to note considerable progress ... [while] concerns over the company's environmental and social record remain". Aviva added that those concerns had depressed the share price of Vedanta, which mines predominantly in India, Zambia and Australia.

Among the other campaign groups attacking the company was Survival International which continued to highlight Vedanta's efforts to mine bauxite in India's Niyamgiri hill, which an indigenous tribe considers to be sacred.

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Mining giant's AGM under siege over rights abuses

Institutional investors in Vedanta echoed concerns of environmental activists outside

Peter Popham

The Independent

29 August 2012

Vedanta Resources, the controversial London-based mining giant accused of serious abuses at its sites in India, came under sustained attack at its AGM yesterday as big institutional investors echoed the complaints of eco-activists demonstrating outside. Protesters poured red paint on the steps and chanted angry slogans.

They included Indians who had travelled from Goa and Tamil Nadu, where Vedanta iron ore and copper mines are blamed for causing toxic floods and other major pollution incidents.

From Zambia came villagers angry that a Vedanta mine there has all but killed off the local river. The issue that united protesters in years past, the company's plan to mine bauxite on the sacred Niyamgiri Hills in Orissa, is on hold, but complaints from Dongria Kondh villagers in the area, where the company has already built a bauxite refinery, continue to pour in.

The prominent human rights campaigner Bianca Jagger, who visited the area in 2010 and was present at yesterday's AGM, told The Independent, "The company has a terrible record on human rights and the environment but it is so deeply entrenched that it is difficult to change it."

When Ms Jagger repeated the charges during the meeting, Anil Agarwal, the former scrap metal dealer who founded the firm that has made him a billionaire, denied them and claimed the company took its environmental and human rights responsibilities seriously.

Meanwhile the firm fired its own counter-attack over Niyamgiri, in the form of an investigation, published in tandem with the annual report, defending its activities around the Orissa mountains.

But if Vedanta has grown more skilful in containing the assaults of its environmentalist accusers, it could find the displeasure of the City more difficult to handle.

Representatives of institutional investors Aviva and Standard Life - both holding millions of Vedanta shares - stood up to question company policies including its commitment to sustainability and the appointment of a new non-executive director, Geoffrey Green, with no relevant experience. The non-executive director Naresh Chandra defended the appointment of Mr Green on account of his financial expertise.

Their comments indicate that, after nine years as a FTSE-100 company, Vedanta has entered new and possibly treacherous waters.

Earlier this year, the former director general of the CBI, Richard Lambert remarked, "It never occurred to those of us who helped to launch the FTSE-100 index 27 years ago that one day it would be providing a cloak of respectability for companies that challenge the canons of corporate governance such as Vedanta."

Yesterday, outside the AGM, the Labour MP John McDonnell said the climate for companies such as Vedanta is becoming hostile, however healthy the bottom line. "After the exposure of the misbehaviour of banks that followed the crash, this is the next sector whose ethical practices are going to be looked at," he told The Independent. "Vedanta is a good example of the problems with mining companies, for their abuse of human rights as well as degradation of the environment."

A spokesman for Vedanta said: "We take any investor concerns extremely seriously and sustainability is at the absolute core of what Vedanta does. There has been a significant number of new sustainability policies introduced this year and Vedanta focuses on responsible stewardship, strong relationships and adding value. We expect all our employees to adhere to our sustainability framework. Vedanta development initiatives benefit three million people in areas such as healthcare and infrastructure."

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Over 12% shareholders oppose hike for Vedanta Resources top officials

Economic Times

29 August 2012

London: More than 12 per cent shareholders of Vedanta Resources Plc have voted against its top deck's 3-5 per cent salary hike for 2012-13 at the company's annual general meeting here.

The votes will not come in the way for the metal major's senior team, including Executive Chairman Anil Agarwal, getting higher salary, as 87.66 per cent of the casted votes were in favour.

According to a company filing in the London Stock Exchange, 12.34 per cent of the 22.26 crore votes cast in a poll on the resolution to approve "Director's Remuneration Report" were against the move.

Vedanta Board had earlier approved 5.04 per cent salary hike for billionaire Agarwal to 1.475 million British pound for 2012-13, from 1.404 million British pound a year ago. His total remuneration, including salary, for 2011-12 was 1.731 million British pound.

In Vedanta, remuneration includes a salary, performance bonus, award under the long-term incentive plan, relevant pension provision and special monetary rewards for the successful integration of merger and acquisition activities.

The Board of the company also approved Deputy Executive Chairman Navin Agarwal's annual salary hike by 3.6 per cent to 1.073 million pound from 1.036 million pound a year ago. The total remuneration of Navin was 1.369 million British pound for 2011-12.

Salaries of the executives in Vedanta are reviewed on an annual basis and changes are implemented effective from April 1 each year taking into account the period of service during the year.

Vedanta's three-member Remuneration Committee comprises all Independent Non-Executive Directors and is headed by India's former ambassador to the US Naresh Chandra.

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U.K. rights groups protest against Vedanta

Ignoring tribal rights devastates lives, is financially reckless: Survival International

The Hindu

28 August 2012

Activists of several rights groups held a protest here on Tuesday calling for mining group Vedanta Resources, an FTSE 100 company, to be struck off from the London Stock Exchange because of its controversial trade practices and human rights record.

Carrying banners and raising slogans against its policies, the protesters gathered outside the venue of the company's annual general meeting in central London and booed its shareholders as they arrived.

Senior Labour MP John McDonnell also joined the protest.

Message from Dongria Kondh tribe

Campaign group Survival International released a message from representatives of the Dongria Kondh tribe protesting against Vedanta's mining project in the Niyamgiri Hills in Orissa: "Even if Anil Agarwal [Vedanta's CEO] himself comes here, we won't leave our land. We will use all our strength to make them leave this place. Let us live our lives in peace," the message said.

Stephen Corry, Director of Survival, said: "Ignoring tribal rights does not pay: it devastates people's lives, and - as Vedanta has found - is financially reckless. The Dongria have the right to be consulted, and to give - or withhold - their consent. If Vedanta had talked to them first and respected their fundamental attachment to their land, they would have saved themselves and the Dongria a lot of trouble."

The South Asia Solidarity Group (SASG) demanded that the British government must end its "support" to Vedanta-sponsored projects.

"This year the list of Vedanta's atrocities is longer than ever before and there are massive popular struggles against it in India and Zambia. Like the notorious Lonmin in South Africa, Vedanta is bringing shame on the London Stock Exchange. Isn't it time they were deleted from it? We call on the British government to stop backing it," said SASG spokesperson Amrit Wilson.

The protest, also backed by Foil Vedanta and Save Goa Campaign, coincided with parallel demonstrations in Goa, Tamil Nadu and Orissa.

‘Glossing over record'

Amnesty International accused Vedanta of attempting to "gloss over" criticisms of its human rights record by publishing what it described as a "meaningless and hollow" account of its operations in India.

"Amnesty believes ‘the Vedanta's Perspective' report is an attempt to calm investor fears over its controversial operations in India as it seeks to expand them," it said, accusing the company of ignoring the impact of its policies on the human rights of local communities in Orissa.

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Amnesty sees red over Vedanta green report

By Promit Mukherjee

DNA India

29 August 2012

Mumbai - Amnesty International, the UK-based independent human rights watchdog, has flayed Anil Agarwal-controlled Vedanta Resources for publishing a "meaningless and hollow" sustainability report - ‘The Lanjigarh development story: Vedanta's perspective' - in the run-up to the company's annual general meeting (AGM) in London on Tuesday.

Amnesty published comments on its website and a counter report - ‘Vedanta's Perspective Uncovered' - on Tuesday.

"Amnesty International has accused the UK-registered mining company Vedanta of attempting to ‘gloss over' criticisms of its poor human rights record in Odisha by publishing a ‘meaningless and hollow' report that puts forward the company's own account of its operations there," said Amnesty's website.

With the company staging its AGM in London, Amnesty believes the ‘Vedanta's Perspective' report is an attempt to calm investor fears over its controversial operations in India as it seeks to expand them.

According to the London Stock Exchange data, the company's shares continued to tumble in the last seven working days and had fallen by almost 8% as investors and shareholders anticipated a heated questionnaire round during the AGM on the company's practices, policies and development strategy.

However, chairman Agarwal tried to allay fears regarding Vedanta's green objectives at the AGM.

Amnesty said it had visited the Lanjigarh area in Odisha, where Vedanta currently runs a million tonne alumina refinery, and the Niyamgiri Hills four times in the last two years to discuss with the local Dongria Kondh community, the affected lot.

Vedanta, through subsidiary Vedanta Aluminium, now plans to increase its capacity to 6 million tonne and source bauxite for the plant from the adjoining Niyamgiri Hills. Currently, the expansion and mining in the hills are halted by the Supreme Court and is under litigation.

Amnesty, in its report, said the company has not mentioned how the local authorities have failed to offer the Dongria Kondh community their right "to address the negative impacts of the mine, and the protection of their interests through consultation and collaboration."

It alleged that Vedanta's report tactfully escaped mentioning the Indian laws under which prior consultation with the elected village council bodies of the Dongria Kondh community is mandatory before any plans for development are implemented.

Amnesty claimed that the company, along with Orissa Mining Corporation and the local authorities, has increasingly failed to consult and discuss issues that could affect the livelihood of local people.

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Vedanta gets Amnesty rap

Nirmalya Behera

Business Standard

30 August 2012

Bhubaneswar - The human rights group, Amnesty International, has accused the London-stock-exchange-listed mines and metals major, Vedanta Resources Plc, of glossing over criticisms of its poor human rights record at Lanjigarh in Odisha's Kalahandi district, where it has set up and is operating a one-million-tonne alumina refinery.

Stating that the company has put forward its own account of operations in the report titled ‘The Lanjigarh Development Story: Vedanta's Perspective', the London-based human rights watchdog termed it "meaningless and hollow".

"The report is an attempt to calm investor fears over its controversial operation in India as it seeks to expand them," Amnesty said in its website.

In its counter report, "Vedanta's Perspective Uncovered: Policies Cannot Mask Practices", Amnesty has incriminated the company of ignoring the reality of the impact on the human rights of local communities in the state.

Some of those opposed to the company's activities have been the subject of fabricated charges, which has the effect of intimidating them from exercising their right to protest peacefully. There is sufficient evidence, uncovered during an ongoing inquiry by India's National Human Rights Commission, that the police, in both the framing of false charges and the suppression of dissent, have colluded to promote the interests of the company, the report said.

When contacted, a company spokesperson said: "Though Amnesty is critical on certain issues, they have given some backhanded compliments to the company for improving its human rights records."

Besides, Amnesty has observed that in response to the criticism of Vendata's operations in Oridsha and elsewhere, the company has taken a number of measures like appointing a chief sustainability officer, establishing a new sustainability framework and developing an exclusive human rights commitment as part of its code of business conduct.

On the negative side, Polly Truscott, deputy director of Amnesty International's Asia-Pacific programme stated in its website, "Our new briefing exposes the glaring gap between the company's assertions and the reality on the ground".

Amnesty International has reiterated its call for suspending the mine plans of the company and establish a process to seek the free, prior and informed consent of the Dongria Kondh community, the indigenous tribal group at the Niyamgiri hill, on the mine plans according to international human rights standards.

On reports that Vedanta may have to temporarily shut its Lanjigarh refinery for want of adequate bauxite supply from other sources, Truscott said, "This may be a short-term problem. What is really at stake here is Vedanta's human rights record".

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Is multiculturalism bad for the FTSE?

Mindfulmoney

29 August 2012

With the problems facing foreign mining giants Vedanta (VED.L), Glencore (GLEN.L) and African Barrick Gold (ABG.L), is the multicultural flavour of the FTSE100 beneficial for the UK economy?

Multiculturalism is - to put it mildly - controversial. Some say multiculturalism  is a vile conspiracy (from the EU?); others suggest it is a happy, unplanned event that benefits us all.

It's much the same with stock market multiculturalism. The London Stock Exchange is the most diverse in the world - its main FTSE100 index is the only national measure of share market value to be packed with companies with little connection to the UK other than place of registration and stock market allegiance.

While the Dow is for US companies, the CAC40 for the French, and the DAX for Germany, the FTSE 100 is a veritable rainbow, embracing everything from South African breweries to Indian bauxite via Mexican silver and Kazakhstan copper. Some 15 mining companies are listed, by far the biggest sector group of non-UK companies - none has any significant economic activity in the UK.

Whether this multiculturalism works for investors can be, as with any other stock market debate, a matter of timing. Over the past year, they have depressed the FTSE 100 - the mining sector is down by some 15 per cent while the index itself is up nearly 13 per cent. Swiss commodities giant Glencore has seen its share price suffer as its takeover of Xstrata rumbles on. But over longer periods, index trackers did well from the miners as they played the commodities super-cycle.

A London listing is the prize from the pit

But irrespective of performance, one thing is clear - the march of the miners to London listings has benefited the City as a financial centre. These companies have shelled out many tens of millions each to bankers, lawyers, accountants and public relations folk, for their initial presence here and continue to pay huge sums to maintain their listings. They believe it is worth it paying premium prices because of the visibility, marketability and respectability they acquire from London.

There are unintended multi-cultural consequences, however, as Indian mining group Vedanta continues to find out. The London listing means annual meetings in the UK, exposing executives and directors to a potential publicity glare that might not be present in their countries of activity.

This week, Indian miner Vedanta held its AGM in central London. This was not the formal affair directors had hoped for. Protesters outside covered the location with red paint.

Inside the meeting, campaigners, many of whom had bought the one share necessary to gain admission, questioned the board in a way that might never have been tolerated in India.

Celebrity blast at the board

Backed by member Bianca Jagger, Amnesty International said: "An ongoing inquiry by India's Human Rights Commission [has found] that the police in both the framing of false charges and the suppression of dissent have acted to promote the interests of the company".

Amnesty's Peter Frankental asked the meeting: "Do you take these findings and allegations seriously and what are you going to do about them?"

Other charges centred on Vedanta's controversial attempts to mine bauxite from a hill in Orissa, India, that is sacred to local tribes.

Vedanta non-executive director Naresh Chandra said: "Give us the information and we will have it investigated". But the meeting heard that pollution control authorities in Goa had ordered the temporary closure of a coke unit after complaints.

Some 13 per cent of shareholders voted against the directors' pay - and this in a company where ethical funds rarely dare to venture.

One result of this and other negative publicity is that the Vedanta share price has fallen 30 per cent this year - far faster than the mining sector. And that risks Vedanta losing its prized place in the FTSE100 index.

Vedanta could fall out of Footsie

The index rebalancing - due in early September - involves demotion to the FTSE 250 for any firm with a market capitalisation lower than that in position 110 on the London stock exchange. Currently, that means any firm with a value under £2.32m - Vedanta is £2.52m so it still has a slim margin of safety. Fund manager Ashmore and interdealer broker Icap are the most likely for the drop while their places are likely to be taken by turnround specialist Melrose , and John Wood Group, the oil and gas power generator.

But whether it survives in the FTSE100 or not, Vedanta is not the only multi-cultural miner under fire in London. A report earlier this year from the London Mining Network suggested that "if you run a mining company and want to get away with fraud, pollution, complicity in torture and even murder, then a listing on the London Stock Exchange (or the Alternative Investment Market for smaller companies) is for you."

The network - an alliance of 27 groups concerned about global impact of mining groups listed or financed in the City - want tighter monitoring of mining companies to be included within the powers of the new Financial Conduct Authority which takes over from the Financial Services Authority early next year.

Currently half of the world's biggest mining companies are registered in London, some attracted by the UK's ‘light touch' regulation which allows companies to be listed in London that would not be acceptable, campaigner say, on the Hong Kong Stock Exchange.

In a report issued in March, UK-listed Mining Companies and the Case for Stricter Oversight, the Network highlighted miners with "outstandingly bad records of poor governance, environmental destruction, illegality and complicity with human rights and workers' rights abuses."

Blacklisted in Norway

It added: " Two of those listed, Vedanta and Barrick Gold [also a FTSE constituent], have been blacklisted by the ethics council of the Norwegian Government but still enjoy the kudos of a London listing."

The campaign says; "Vedanta, with major mining concerns in India, has been described as the worst case and a ‘serial offender' on practically every criterion." The report lists scores of other allegations against miners including serious toxic pollution, fraud, corruption and complicity in shooting protesters.

Richard Solly of the London Mining Network,said: "Because such businesses are listed in London, and particularly if they are also on the FTSE 100 of top companies, worker pension funds may well be investing in them, along with high-street banks and insurance companies."

The campaigners want miners to:

• obey the law in the UK and the countries in which they operate, including compliance with biodiversity, ecological and environmental protection.
• ensure that companies recognize and respect international human rights and environmental standards
• back strong reporting rules, including public reporting of payments to government.

"People and organizations concerned about the conduct of UK-listed companies should be able to make their concerns known to the FCA through an accessible and transparent procedure," Solly adds.

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Local stake in controversial miner sold

Londonderry Sentinel (Northern Ireland)

26 August 2012

THE pensions of hundreds of Londonderry public sector workers are no longer financing controversial UK-mining firm Vedanta Resources, which was accused by Amnesty International of breaching people's human rights through its bauxite and aluminium operation in Orissa, India, the Sentinel can reveal.

Within the last 12 months the Northern Ireland Local Government Officers' Superannuation Committee (NILGOSC) pension fund has offloaded a £1,165,695 (49,020 share) holding in Vedanta.

The decision to sell - taken by investment managers on behalf of NILGOSC - followed a high profile campaign by Amnesty over the development of a new bauxite mine and the expansion of an existing aluminium refinery at the foot of the Niyamgiri Hills.

NILGOSC was asked by the Sentinel if its move was for ethical concerns.

David Murphy, NILGOSC, Chief Executive and Secretary, said: "NILGOSC itself does not decide which shares to purchase or sell so we do not hold information as to the reason for the sale."

Amnesty claimed the UK-based company was threatening the human rights of indigenous communities in Orissa and that villagers living near its refinery are imperilled by air choked with dust and a toxic waste pond right beside a local river.

But last year Vedanta issued a comprehensive response to Amnesty saying its plant is welcomed by the local population as a ‘significant opportunity for progress and growth.'

Until this year many local council workers, alongside staff at Ilex, WELB, NIHE, Magee, City of Derry Airport, NWRC, Ulsterbus and some local schools have unwittingly been investing in Vedanta through a NILGOSC pension fund which has been invested in a diverse portfolio of global shares, amongst them recession proof staples such as the military industrial complex, cigarettes, alcohol and gambling.

Ironically, almost half-a-million pounds are also invested in Raytheon on behalf of public sector workers across Northern Ireland, including thousands of workers in the North West. Raytheon Systems Limited left Londonderry in 2010 after a sustained campaign against their presence here.

The NI workers' pension pot has also been poured into Honeywell International which tests, develops and stockpiles nuclear bombs at the Pantex Plant in Texas, for the US National Nuclear Security Administration (NNSA); and Lockheed Martin which makes submarine launched ballistic missiles amongst other military hardware products. Money has also been poured into bookmakers William Hill and brewer Carlsberg.

Whilst NILGOSC's stake in Vedanta has now been sold local workers are still helping to fund Raytheon (£416,148.96; 12,600 shares); Honeywell International (£813,872.63; 21,300 shares); Lockheed Martin Corp. (£534,235.64; 9,500 shares); William Hill (£8,084,800; 3,100,000 shares); Carlsberg (£3,067,338.79; 59,390 shares); British American Tobacco (£49,980,540.17; 1,586,432 shares); and the Imperial Tobacco Group (£11,412,493.95; 450,197 shares).

Vedanta responded in detail to Amnesty's claims in its 156 page report ‘The Lanjigarh development story: Vedanta's perspective.'

In a statement Chief Operating Officer at Vedanta Aluminium, Dr Mukesh Kumar, said the Lanjigarh Project was regarded by the local population as presenting a significant opportunity for progress and growth.

"As a company with its roots in India with global operations, Vedanta acknowledges its duty to value the socioeconomic landscape of the region, local culture and traditions, which it has endeavoured to safeguard and protect.

"Additionally, in its operations the company has ensured best in class technology and processes for our refinery with minimum environmental impact," he stated.

He continued: "Today we have more than 2,500 employees and contractors, of whom a significant majority are locals.

"We have also created significant livelihood opportunities around our plant through various contractors/suppliers.

"Our community programmes target the key concerns of the locality such as health, education, empowerment of women and basic infrastructure development and we have made significant improvements on these fronts, which are evident from the statistical data published by the Government.

"To accelerate the process of development, and to avoid duplicating projects that are run by the State Government, Lanjigarh Project Area Development Foundation (LPADF) has been formed as required by the directives of the Honourable Supreme Court of India.

"The company will contribute 5 per cent of its profit from the Lanjigarh Project before interest and tax or USD 2.2 million per year, whichever is more, for the development of the area."

NILGOSC boss, Mr Murphy told the Sentinel: "As we set out in our Statement of Investment Principles NILGOSC delegates the selection of investments held to its fund managers and does not impose any investment restrictions in regard of social, ethical and environmental issues.

"NILGOSC does not make any investments specifically for social, ethical and environmental reasons. However NILGOSC has instructed its active fund managers to take account of social, ethical and environmental considerations provided our primary financial obligation is not compromised."

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India orders Sesa Goa to shut coke unit on pollution

Siddesh Mayenkar

PlanetArk

29 August 2012

Sesa Goa, owned by miner Vedanta Resources, must shut its 280,000 metric tons per year metallurgical coke unit in western Goa state after complaints about pollution, a State Pollution Board official said.

Shares of Sesa Goa extended losses by 3.73 percent at 180.45 rupees per share on the news.

"We have issued directions for closure of the coke unit of Sesa Goa," Levinsons Martins of the Goa State Control Pollution Board told Reuters.

The board has also called for a report from an environment ministry department on air and land pollution to be delivered in 7 days, the official said. The plant would remain shut at least until then.

Sesa Goa said it had not received any order yet.

"We are yet to receive any notice, so commissioning is still on," said P.K. Mukherjee, managing director.

Metallurgical coke is an ingredient for making steel.

About 35 percent of the metallurgical coke produced by Sesa Goa is sold to local steel makers, while the rest goes into its own blast furnaces for production of pig iron.

India's coke industry, which is dominated by integrated steel plants, is estimated to be at 67 million metric tons.

(Reporting by Siddesh Mayenkar; Editing by Jo Winterbottom)

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Goa villagers protest pollution by Sesa Goa plant

Press Trust of India

27 August 2012

Panaji - Thousands of villagers from Navelim in Bicholim taluka of Goa today observed a day-long bandh against Sesa Goa's metallurgical coke plant in the village, claiming that it is polluting their surroundings.

Police officials said the bandh which started at 7 am has remained peaceful till now. Locals were seen sloganeering on the road and blocked the entire stretch which connects Panaji to Bicholim taluka.

Sundar Gawas, one of the protestors, said Sesa Goa had taken the entire village and State Government for granted.

He claimed that expansion of the existing metallurgical coke plant has increased pollution levels in the surroundings.

"We can see black dust powder on our food. God knows how much of such particles we have been inhaling," he said.

Sesa Goa, which set up its plant here in 2006, has begun expansion of its facility since this month. The company spokesman earlier had confessed that the high capacity diesel burners had misfired during pre-heating activities, releasing black smoke in the air on August 17 and August 18.

The villagers today claimed that the State Pollution Control Board and even the Ministry of Environment Forest (MoEF) did not conduct any public hearing while allowing the expansion of the plant, which is mandatory according to law.

The gram sabha held on Sunday had decided to hold a one-day bandh to attract attention towards the gross illegalities committed by the plant.

The villagers claimed that the plant has been polluting their water sources.

Sesa Goa Ltd has been operating a 250,000-tonne pig iron manufacturing plant since 1992 and a 280,000-tonne metallurgical coke manufacturing plant since 1994 at Amona which was shifted to Navelim in 2006.

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Season of Change at Cairn

New chairman Navin Agarwal has to reinstate faith of shareholders

Jyoti Mukul & Ajay Modi

Business Standard

24 August 2012

New Delhi - With the Agarwal family tightening its grip over Cairn India, and the oil concern re-focusing on exploration, the company's professional structure will be put to test.

This Wednesday, Cairn India's new chairman Navin Agarwal gave his maiden speech at the company's annual general meeting. It began with a vote of thanks to Bill Gammell, the previous chairman, and Rahul Dhir, the outgoing managing director and chief executive officer.

Agarwal had an important task at hand-to reinstate the faith of shareholders in the company, which recently changed hands. This will not be a cinch.

After all, he is the brother of Anil Agarwal, chairman of the Vedanta group, which took over Cairn India from Cairn Plc. The takeover was not easy. Shareholders in the past had protested that a raw deal was given to them and even the government did its bit to stall the handing over by making it conditional to royalty and cess issues.

All that is now history, but Cairn India's next big challenge is to figure out how to handle the significant management and business changes that are sweeping the organisation.(

A family affair

Agarwal replaced Gammel, chairman of Cairn Plc, and P Elango will replace Dhir from September 1 as the interim CEO. "The search for his successor (Dhir's) is underway," said Agarwal in his address. Elango has been with Cairn for over 15 years but is not a part of the board as yet.

So post-Dhir, Cairn India's board will be left with no full-time director.

There will be seven non-executive directors, of which three will be the new promoter's nominees. The board composition will obviously undergo a change once a new CEO is in place but the question making the rounds is whether the company will retain its professional structure or not.

Analysts and company dismiss any doubts about the company's professional capabilities. "I do not think that the recent management change will have any impact on the company since they have strong processes in place," says Bhavesh Chauhan, research analyst for oil and gas at Angel Broking. Elango, too, says the suspicion of an overhaul is incorrect. "The perception that a churn is happening post-Vedanta takeover is not correct. Cairn India continues to enjoy same level of independence and there is a support for growth from Vedanta," he says. When Cairn India was created, it was modelled on the lines of Larsen & Toubro as a professionally run company and it intends to remain that even now, he adds.

Investor protection groups, though, are not too sure. Days before the AGM, Stakeholders Empowerment Services had advised shareholders to oppose the move to have three promoter nominees, including Anil Agarwal's daughter Priya, as non-retiring directors. With Dhir out of the board, the number of directors stands reduced to seven, so, technically too, three of them could not have been elected so. AGM ended with the two being appointed as permanent directors, and Priya as rotational director, a move which has quickly and clearly established the role that the Agarwal family intended to play at Cairn.

Back to exploration

Another change taking place simultaneously has largely gone unnoticed, but is now evident after last week's acquisition of an exploration block in South Africa. In what is the first deal after the Vedanta takeover, the company has acquired a 60 per cent stake in an oil and gas exploration block on the west coast of SA from state-owned PetroSA. The block contains a gas discovery found out in 1987. Cairn India will conduct seismic surveys and follow it up with initial exploration drilling.

Though the management sees this acquisition as an important step for the company's growth beyond the Indian sub-continent, it is also part of a larger strategy, which is to resume focus on exploration.

With its Rajasthan assets as its core business, Cairn had become a project driven company. Now, having the African asset and five NELP blocks under exploration, it wants to go back to its original strength of being an oil explorer. "In 2008, we knew that in a year we will start production from Rajasthan and we thought it was good to plant some seeds of growth, as growth can come only from exploration. So, we looked at Sri Lanka and made a deepwater gas discovery. For a company with onshore operations going in deepwater and establishing a discovery is a good achievement. It was a learning experience for us," says Elango.

Black gold in Rajasthan

In 2006, when Cairn India was listed, the focus was Rajasthan. There were risks associated in terms of infrastructure and customers. Developing a field of that size in a desert region was a challenge. There was lack of clarity on royalty, and the oil and gas business was new to the Rajasthan government. "However, one of the key strengths of the company is its single minded approach in whatever we do. So the focus was first oil from Mangala.

It has been three years that we commenced production from Rajasthan and we have already produced 100 million barrels of crude oil. I don't think there is any other field in India which has achieved this milestone in less than three years." Once Cairn began hitting the 175,000 barrels per day milestone, the company became confident of being able to generate lots of cash. It was also the perfect opportunity to re-launch the company to sharply focus on exploration, says Elango. "We thought we should step outside the Indian subcontinent but focus on a particular region and we choose South Africa," he adds.

The next El Dorado?

The choice of region was based purely on geological prospects and the ability of the company to leverage its strength. In regions like West Asia, a company like Cairn cannot do anything different, but in South Africa its achievement of constructing a heated pipeline became a unique selling point. Quite unlike its government-owned peer, ONGC Videsh, which is looking at partnerships across the regions, Cairn is shopping globally based on technological strengths it has built.

Cairn's story in India can be traced to the Ravva field where it first started producing crude oil. The revenue from this field and equity-raising through an India listing in January 2007 helped it invest $2.4 billion in Barmer and an additional $1billion in pipeline. Almost 80 per cent of what Cairn generates now goes to the Union and state governments in the form of royalty to state government, cess to central government, other taxes and crude oil share to ONGC. Irrespective of where the crude oil prices go, the company feels 20 per cent will be good enough to run operations.

As an endorsement of the company's strategy, Elango cites the example of Ravva field where it operated at $12 per barrel (in 1998-1999) and also at $120 per barrel. In Ravva, 60 per cent goes towards government's take.

Therefore, Rajasthan assets will give it money for years to come, while it continues to look for more oil in India and overseas. "Cairn's attempt to acquire exploration asset is more of an attempt to create value through exploration - which is the key value driver for any upstream company globally," says Niraj Mansingka, associate director (Institutional Equities-Research), Edelweiss. Somewhere, there is also a nagging reality that India is not geologically endowed with good hydrocarbon prospects.

When production at Barmer began on August 29, 2009, in the presence of Prime Minister Manmohan Singh, the sands of Thar provided a turning point both in the country's hydrocarbon history and that of Cairn. With oil revenue from Barmer coming into its pocket, it can now expand its canvass boldly.

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Vedanta may temporarily shut down Odisha refinery

Business Standard

22 August 2012

Kolkata/ Bhubaneswar - Rapidly dwindling stock of bauxite at its refinery complex at Lanjigarh in Odisha's Kalahandi district has forced Vedanta Aluminium Ltd (VAL) to downsize its capacity significantly.

And, with bauxite stock depleting to almost ‘zero level', the refinery plant is barely able to run intermittent operations for the past two days after operating at 40-50 per cent capacity since August 1 this year.

After being denied access to the bauxite deposits at Niyamgiri Hills by Union Ministry of Environment and Forest (MoEF), VAL wholly depended on bauxite sourced from other states to keep its refinery operation afloat at Lanjigarh.

But supply glitches from have poured cold water over its plans, leaving the company high and dry. With sourcing of bauxite from other states becoming increasingly difficult, VAL may be left with no other option except going for ‘temporary shutdown' of the plant, says a top official of the company.

"There is no bauxite to talk of. We have zero stock. The company is making all out efforts to source bauxite but things are not working in our favour. One of our major mines in Chhattisgarh which used to supply us 120,000 tonnes of bauxite per month has become non-operational due to expiry of mining lease. Mine operations of another smaller mine in the same state that supplied 60,000-70,000 tonnes per month has been impacted by rains," said the official.

Of late, the company is unable to get bauxite from Gujarat Mineral Development Corporation (GMDC) as the company had not issued any tender recently. Besides, private miners in Gujarat are preferring to export their material instead of selling it in the domestic market because of better returns, the VAL official informed.

Bauxite mines in neighbouring Jharkhand and Andhra Pradesh were bogged down by regulatory issues and this has hit supplies, he added.

To run the one million tonne per annum (mtpa) refinery plant at full steam, VAL needs 300,000 tonnes of bauxite every month.

He clarified that there was no pressure piled by Vedanta Resources' shareholders to shut the Odisha refinery as it was bleeding financially.

"There is no such pressure from the shareholders to close the Odisha refinery. Its true we have been running losses by importing bauxite from other states, but we have always strived to keep the refinery running," he said.

Owing to its total dependence on externally sourced bauxite, VAL has hitherto incurred cumulative losses to the tune of Rs 3,000 crore.

"More than 7,000 people are employed directly or indirectly at the Lanjigarh refinery. We cannot allow the refinery to close, putting the future of so many people at stake. VAL is currently running its 0.5 mtpa smelter plant by importing alumina," he added.

VAL's Lanjigarh refinery as well as smelter and captive power plant (CPP) complex at Jharsuguda has seen grounding of investments of Rs 50,000 crore. The company's smelting facility and CPP engage more than 15,000 people.

VAL had designed its refinery in Odisha keeping in mind the locally available bauxite. The aluminium major had entered into an agreement with state controlled miner Odisha Mining Corporation (OMC) for supply of bauxite.

But attempts to mine bauxite at the ecologically sensitive Niyamgiri hills under OMC's leasehold in Lanjigarh district were red flagged by the environment ministry that had scrapped the Stage-II forest clearance on August 24, 2010.