ABN AMRO Bank
c/o Mr. V.G.P. van Assem - Senior Vice President Sustainable Development
PO Box 283
1000 EA Amsterdam
Utrecht, 21 January 2005
Dear Mr. van Assem,
The India Committee of the Netherlands ICN, ICCO, Milieudefensie/Friends of the Earth Netherlands and Novib / Oxfam Netherlands want to express their concern about the link between ABN AMRO Bank and Vedanta Resources Group. Vedanta Resources Group is a London Stock Exchange registered British metals and mining group with its principal subsidiaries operating throughout India.
The ICN, ICCO, Milieudefensie and Novib are, as you will know, civil society organisations working from the Netherlands on issues related to development, environment and corporate social responsibility. These organisations are all member of the Dutch CSR Platform. We have extensive relations with a number of (partner) organisations in India.
Over the past months we have been receiving alarming information on the apparently socially and environmentally irresponsible manner in which Vedanta Resources and its subsidiaries are carrying out their operations in the copper, aluminium and zinc industries in India. Vedanta Resources has been criticised for violating India’s forestry and environmental laws, failing hazardous waste management, bad governance; for being involved in corruption and shady politically motivated deals over building permits and even for violation of human rights, such as having a hand in forced displacement. More specific details per case are given below.
We understand that Vedanta Resources Group operates as a holding company, owning majority stakes in six operating companies, including Madras Aluminium Company Ltd., Sterlite Industries (India) Ltd., Vedanta Alumina Ltd., Hindustan Zinc Ltd. and Bharat Aluminium Company Ltd. BALCO. Vedanta Resources Group controls 82.33% of the shares of Sterlite Industries (India) Ltd. Sterlite Industries is the main subsidiary of Vedanta Resources. Sterlite Industries in turn controls Vedanta Alumina Ltd. (100% owned by Sterlite Industries) and BALCO (51% owned by Sterlite Industries). In November 2004, Vedanta Resources Group has announced it would exercise its option to acquire the remaining 49% of BALCO.
A number of Vedanta Resources Group's subsidiaries are busy expanding. The estimated costs of the expansion programme and the acquisition and expansion plans announced since March 2004 amount to considerable sums. This includes the announced acquisition of the remaining 49% of BALCO.
We base our concerns on reports of the Indian Supreme Court Monitoring Committee on Hazardous Waste Management, objections raised by the Environmental Committee of the Indian Supreme Court, as well as a series of publications, statements, press releases, press clippings etc from various sources, including Indian and international civil society organisations and the media. Among the NGOs that have expressed their concerns are mines, minerals&People, Greenpeace, MineWatch and the Australian Mineral Policy Institute.
Our main concerns can be summarised as follows:
According to our information, verified by an independent researcher, ABN AMRO Bank is financing Vedanta in a number of ways. ABN AMRO Bank is prominent among the groups of financial stakeholders of Vedanta Resources. Of the total assets of Vedanta Resources amounting to US$ 2,997.8 million, banks finance US$ 619.6 million, or 20.7%.
- Sterlite Industries (India) Ltd. operates, among other activities, a copper smelter at Tuticorin, Tamil Nadu State, South India. Sterlite Industries is reported to handle its hazardous waste in an extremely irresponsible manner. In September 2004, The Indian Supreme Court Monitoring Committee on Hazardous Waste Management (SCMC) published a highly critical report concerning the failing waste management of the Sterlite copper smelter at Tuticorin. The SCMC writes that the “The inadequacies observed in the environmentally sound management of wastes have resulted in adverse impact on the recipient environment including the health of people in the area” and concludes that “it would be inadvisable to consider expansion of the unit at this stage. The environmental clearance for the proposed expansion should not be granted by the MoEF; if it has been granted, it shall be revoked.”
- Vedanta Alumina Ltd. is operating bauxite and alumina projects close to Lanjigarh, Kalahandi District, Orissa State. Steps have been taken to develop a huge(r) aluminium refinery and to develop bauxite mines in Rayagada and Kalahandi districts. A joint venture agreement was signed on 5 October 2004, between the Orissa Mining Corporation and Vedanta Alumina Ltd. Vedanta Alumina is holding a 74% stake in the joint venture company and is controlling and overseeing the day-to-day operations of the bauxite mining. These developments have given rise to a lot of criticism.
In January 2005, the Environment Committee of the Indian Supreme Court has objected to Vedanta’s Alumina’s project in Orissa. The Environmental Committee observed that this project and mining activity in the (sacred mountain) Nyamgiri area of Kalahandi district will have an adverse impact on the environment. The Committee pointed out that the company has been violating forest laws, including the Forest Conservation Act, and that construction of the refinery has been taken up on forest land without clearance under the Forest (Conservation) Act. One of the main concerns of the Environment Committee is the threat to the area’s biodiversity.
The Central Empowered Committee set up by the Supreme Court is carrying out hearings on petitions filed by petitioners including conservationists and social activists. The CEC has raised a number of issues, such as the manner in which the rehabilitation of the tribal population displaced by the Aluminia Refinery project was carried out.
Opposition parties, including Congress Party, have submitted a memorandum to the State Governor alleging that the joint venture agreement was signed in violation of the environment and forest laws and was not in the best interest of the state.
The (people’s) protest against mining in this area is not new, on the contrary. For years the tribal populations of Kashipur area in Rayagada district are trying to prevent the expansion of mining activity, particularly focusing on the plans of Utkal Alumina India Ltd (UAIL) to set up a alumina refinery.
The (proposed) mine development is in a protected tribal self-rule area where, according to the Fifth Schedule of the Indian Constitution, the written agreement of the local population through their Panchayat village council is needed before any land or resources can be transferred to third parties – but this has not been (sufficiently) done.
- Bharat Aluminium Company Ltd (BALCO) is a fully integrated aluminium producer located in Chattisgarh State, central India. The company operates a bauxite mine and the Korba alumina refining and aluminium smelting complex. There are plans to open another mine named Bodai-Daldali in Kawardha District in the near future. At the moment, a coal-fired plant power plant is being constructed.
The above mentioned concerns are equally relevant to the operations and development plans of BALCO in Chattisgarh.
To our understanding this makes ABN AMRO BANK a significant (financial) partner of Vedanta Resources and its subsidiaries.
- In December 2004, Vedanta Resources issued US$ 500 million 5˝ year bonds with 6.625% interest in London. The issue was arranged by ABN AMRO Bank, together with Barclay's Capital and Deutsche Bank. The proceeds of this bonds issue will (according to the Economic Times of 26 November 2004) be used for Vedanta Resources’ subsidiary Vedanta Alumina Ltd alumina refinery project currently under construction in Lanjigarh, Kalahandi District, adjoining Rayagada District, Orissa State. On 20 January 2005, Vedanta Resources has raised $ 100 million by reopening these existing 2010 bonds.
- In June 2004, Sterlite Industries raised a three-year US$ 67.6 million loan arranged by ABN AMRO BANK, together with ANZ Investment Bank and ICICI Bank.
- In September 2003, Bharat Aluminium Company Ltd (BALCO), obtained a Rs 10 billion/ US$ 218 million syndicated loan facility with a maturity of six years for the modernisation and expansion of its smelter at Korba, Chattisgarh State. This loan syndicate in which 18 banks participate, was arranged by ABN AMRO BANK. ABN AMRO BANK itself participates for an amount of US$ 7.6 million.
ABN AMRO BANK takes pride in its Business Principles and Corporate Values and its policies on sustainable development. ABN AMRO BANK has developed a Mining Policy which includes a list of requirements to be taken into account when assessing any project. For example, criteria are formulated for Environmental and Social Impact Assessments (ESIA) and Biodiversity Action Plans to be carried out by an independent third party. ABN AMRO BANK has subscribed to the Equator Principles.
However, close financial involvement with Vedanta Resources and its subsidiaries does not seem to be compatible with the (spirit of the) principles and values ABN AMRO BANK is promoting. This gives rise to the following questions:
Also, to better understand ABN AMRO BANK’s position vis ŕ vis Vedanta Resources we would like to raise the following questions:
- Is ABN AMRO BANK aware of the ongoing and increasing criticism of the way Vedanta Resources and its subsidiaries are operating when it comes to adherence to and implementation of forest and environmental legislation, hazardous waste management, social stakeholder dialogue, corruption, bribery, etcetera?
- Has ABN AMRO BANK actively reviewed its financial involvement with Vedanta resources and its subsidiaries against its own sustainability principles? How did this review process take place?
- Has ABN AMRO BANK addressed these issues with Vedanta Resources? If so, how and when, and to what effect?
We would like to be convinced that ABN AMRO Bank is genuinely and actively applying its principles and values concerning corporate social responsibility in its financial relations with Vedanta Resources Group. Minimally, ABN AMRO Bank should address these matters with Vedanta Resources and urge Vedanta Resources to take the generalised criticism and objections into account, to comply with recommendations of the Supreme Court and to start a genuine stakeholder dialogue. We consider this to be necessary steps towards the development and implementation of socially and environmentally responsible policies and practises to be applied throughout Vedanta Resources’ operations.
- Did ABN AMRO BANK benefit from any fees for arranging the above mentioned September 2003 syndicated loan facility, and the December 2004 bonds issue?
- Is ABN AMRO BANK contemplating to facilitate the arrangement of the foreseeable future financing needs of Vedanta Resources?
We are looking forward to your swift response and would appreciate to discuss this matter in more detail in a personal meeting.
India Committee of the Netherlands
Also on behalf of:
Novib / Oxfam Netherlands
Milieudefensie / Friends of the Earth Netherlands