Local police kill thirteen protesters against the expansion of the firm’s copper-smelting facility
AFTER 99 peaceful days of protests, the 100th brought carnage. On May 22nd in Tuticorin, a coastal town near the southern tip of India, police indiscriminately fired live rounds into a crowd of several thousand demonstrators who were opposing the planned expansion of a copper-smelting facility. Thirteen people died and scores more were injured. The fallout threatens to be a chronic headache both for the Indian authorities and Vedanta, the mining giant which owns the facility.
Corporate public-relations consultants in London, where Vedanta’s main holding company is based, have depressingly ample experience in helping commodities firms whose reputations risk being sullied by such police violence. Royal Dutch Shell, an oil group, still faces ire for the way Nigerian authorities arrested then executed Ken Saro-Wiwa, an activist, in 1995. Lonmin, a platinum-miner also listed in London, had to rebuff claims by South African police that it should carry some blame for cops shooting its striking workers there in 2012, which resulted in 34 deaths.
Vedanta’s Indian founder and boss, Anil Agarwal, stuck to the PR script, repeatedly describing the shooting as “absolutely unfortunate”. That proved an insufficient penance: state authorities in Tamil Nadu announced the Tuticorin plant would be shut permanently, never mind expanded.
As a firm that gets stuff out of the ground, mostly in poor places, Vedanta is used to campaigns. But its claims of world-class environmental stewardship at the Tamil Nadu plant sit awkwardly with reports of every home in Tuticorin containing at least one person wheezing or worse. In 2013 it was fined 1bn rupees (then $16m) for violating pollution control norms. Its troubles span the country. Earlier this year it said it would write off $600m after losing rights to drill iron ore in Goa, on India’s western coast, after “pollution and licensing irregularities”. A tribe in Odisha, a state up the coast from Tamil Nadu, fought for years to stop Vedanta drilling for bauxite in hills it considered sacred, inviting comparisons to the plot of the film “Avatar”.
Neither the firm nor the authorities come out of the latest dispute well. Authorities in Tamil Nadu stand accused both of being too soft on Vedanta before the shooting and of over-reacting in its aftermath. The reason they gave for closing the plant was that it was unpopular, something which was clearly true before it decided to shoot people for saying just that. Vedanta will surely challenge the closure in court once tempers have cooled.
M.K. Stalin, a prominent Tamil opposition politician, questioned why protesters were given no warnings before shots were fired, terming the incident “mass murder of innocent people”. A video of a policeman before the shooting, saying that at least one protester should die, looks incriminating. The violence and its chaotic aftermath are hardly the image the Indian government will want advertised as it assiduously courts foreign investment.
The firm’s own share of the trouble will take more than press releases to remedy. Its shares have tumbled by a quarter since the Tuticorin protests kicked off. Standard & Poor’s, a credit-rating agency, says the facility’s closure could trim pre-tax earnings by up to $250m (about half of the pain would be borne by outside investors in the Indian entity). The parent company’s comparable earnings were $1.4bn in the year to March 2017 and $2.5bn in the year to March 2018.
Opponents seized on Vedanta’s London stockmarket listing to exert pressure. John McDonnell, shadow chancellor of the exchequer for the opposition Labour party, called the shooting a massacre and demanding Vedanta shares be delisted. The episode will vindicate those who already think its opaque structure, complex corporate governance and recurring run-ins with environmental watchdogs as reason enough to avoid it.
Mr Agarwal, once a scrap merchant who built the company over four decades, has prided himself on understanding India better than foreign interlopers trying to make a quick rupee. Despite his regret over the deaths, he says that “fake activists” are taking advantage of its democracy. Having refined and reprocessed metals for so long, he will now have to do a similar job on his company’s reputation.