Image courtesy: www.thehindu.com
June 01, 2018
By: Venkatesh Nayak
Readers may recall the gory incidents that took place at Thoothukudi (Tuticorin) in Tamil Nadu in the southern part of India on 22 May, 2018. 13 protesters died on the spot when the police opened fire to disperse an assemblage of thousands of local residents and representatives of civil society groups. They were protesting against the adverse environmental impact of the industrial operations of Sterlite Copper which runs a copper smelter plant in the area. Accusations against the company have ranged from polluting local water resources to plans for expanding the installed capacity of the plant without the necessary environmental clearances. A ground report published in The Wire recently, mentions the decision taken by Norges Bank a few years ago to not invest funds from Norway's Government Pension Fund Global (GPFG) in Sterlite "due to an unacceptable risk of complicity in current and future severe environmental damage and systematic human rights violations."
This decision and the materials provided by the Norwegian Council on Ethics established for the purpose of guiding GPFG investment decisions are all publicly accessible on Norwegian websites. The objective of this email alert is to place in the public domain facts and materials that are publicly available on Norwegian regulatory websites, in order to encourage more informed debate on the developments around the incidents in Thoothukudi. The purpose of this email is not to defame any company but to point out that investor pressure does help improve the track record of at least some errant companies. As on date, GPFG funds are invested in 275 public and private sector enterprises in India and Vedanta/Sterlite is not one of them.
What is Norway's GPFG?
Norges Bank (NB) is responsible for managing Norway's Government Pension Fund Global (GPFG). GPFG is described in the following simple terms on NB's website:
" The Government Pension Fund Global is saving for future generations in Norway. One day the oil will run out, but the return on the fund will continue to benefit the Norwegian population."
I wish our political leaders displayed similar levels of wisdom with due care for future generations in India.
GPFG comprises of Norway's earnings from the country's oil wealth. GPFG is said to be worth Norwegian Kroner 8,436 billion which is equal to USD 1,026 billion or INR 69,285 billion. NB claims to have invested these funds in 9,146 companies operating in 72 countries around the world of which 1.4% are listed companies world-wide and 2.4% are listed in Europe alone. According to the Bank, GPFG funds are invested for the long term. Some well known global companies in which GPFG has invested are- Apple Inc., Microsoft, Nestle and Amazon.com, Novartis and Samsung. This is unlike many other portfolio investors who invest in stocks for the short term seeking to make a quick buck with their billions and often end up ruining small investors' fortunes and entire national economies. India and S.E. Asian economies have experienced such predatory investments in the past.
Some companies with India operations blacklisted from receiving GPFG funds
According to the website of Norges Bank, the following public sector and private sector corporations in India have been excluded from receiving GPFG funds because of their adverse track record relating to environmental damage or human rights violations or engaging in operations that are unacceptable to the ethical principles that inform their investment decisions. Vedanta/Sterlite is one of the companies mentioned on this list.
Public sector corporations excluded from GPFG investment with dates and reasons (as mentioned on GPFG website):
1) BHEL Ltd. (May 2017 - severe environmental damage)
2) Coal India Ltd. (April 2016- more than 30% operations relate to thermal coal)
3) Gujarat Mineral Development Corporation Ltd. (April 2016- more than 30% operations relate to thermal coal)
4) NTPC Ltd. ( April 2016- severe environmental damage)
Some private sector corporations based in India or having operations through subsidiaries or partners in India with dates and reasons (as mentioned on GPFG website:
1) Reliance Infrastructure Ltd. ( April 2016- more than 30% operations relate to thermal coal )
2) Reliance Power Ltd. ( April 2016- more than 30% operations relate to thermal coal )
3) The Tata Power Company Ltd. ( April 2016- more than 30% operations relate to thermal coal)
4) Imperial Brands and ITC Ltd. (January 2010 - tobacco production)
5) Zuari Agro Chemicals Ltd. (April 2013- serious violation of human rights - employment of child labour)
6) POSCO (2015- severe environmental damage)
7) Vedanta Resources Plc and Vedanta Ltd. (2014- previously included Sesa Sterlite, Sterlite Industries Ltd. and Madras Aluminum Company - severe environmental damage and systematic human rights violation)
8) Cairn Energy Plc (June 2016- serious violation of fundamental ethical norms. Cairn India has since been taken over by Vedanta Ltd. and is fighting a tax evasion case in the Delhi High Court. The tax authorities had placed on Cairn India a capital gains tax demand of INR 20,495 crores in 2015)
9) ZTE Corp (January 2016- gross corruption - Indian subsidiary is ZTE Telecom Pvt. Ltd.)
10) Walmart Inc. (June 2006 - complicity in serious or systematic violation of human rights)
11) Philip Morris International (January 2010 - production of tobacco. India operations are through Godfrey Philips Ltd. and K. K. Modi Investment and Financial Services Ltd.)
12) Honeywell International Inc. (January 2006- production of key components of nuclear weapons. Honeywell India is engaged in a range of sectors including aerospace and defence, home and building technologies, safety and productivity solutions among others).
13) BAE Systems (January 2018- production of key components of nuclear weapons- BAE partners with Indian counterparts in the defence industry sector in INdia)
Click on the links above to access the reasons for blacklisting these companies.
According to the Council on Ethics which guides the investment decisions of GPFG, the case against Vedanta's exclusion is not just its operations in Thoothukudi but also its track record at the refinery near Mettur dam in Tamil Nadu, mining operations in Niyamgiri Odisha, and the refinery in Lanjigarh, Odisha and other operaitons. The decision to blacklist Sterlite and its sister companies was first taken in 2007. Click here for the note prepared by the Council of Ethics recommending exclusion of Vedanta/Sterlite from the GPFG investment universe.
Vedanta is said to have advocated with GPFG/NB against the exclusion, but the decision to exclude them was reconfirmed on the basis of the recommendation received from the Council on Ethics in 2013. I could not find this document on the GPFG website. So I did the next best thing. I placed a request for this document on the Norwegian Government's electronic records website. The official recommendation to exclude which is in Norwegian is in the first attachment. An unofficial translation alongside the Norwegian text from the official document is in the 2nd attachment. The controversy continued until 2017. Related correspondence has been reproduced on the website of Mines and Communities. However I have not been able to find the original documents on the websites of GPFG/NB or the Council on Ethics.
Norges Bank has invested GPFG funds in 275 Indian public and private sector companies
In fact, despite blacklisting a handful of companies, Norges Bank has invested GPFG funds in 275 Indian companies operating in both the public and private sector. They have invested in the equities of banks such as Allahabad Bank, Andhra Bank, Bank of India, Canara Bank, IDBI Bank, J&K Bank, Punjab National Bank, State Bank of India, UCO Bank, Union Bank of India and Vijaya Bank in the public sector and in private sector banks like Axis Bank, HDFC Bank, ICICI Bank Ltd., Indus Ind Bank and Yes Bank. Some of the well known public sector enterprises in which they have invested include, Bharat Electronics Ltd., BPCL, GAIL India, HPCL, Indraprastha Gas Ltd., NBCC, NHPC, Oil India, ONGC, Power Grid Corporation of India, Shipping Corporation of India, Ltd.
GPFG funds are invested in the sister companies of some of those which have been black listed. For example, they have invested in the equities of Reliance Industries Ltd., Reliance Capital Ltd., Reliance Communications Ltd., Tata Consultancy Services, Tata Motors, Tata Steel, Tata Chemicals etc. So it is the business and ethical practices of a specific company that matters to their investment decisions instead of its lineage or umbilical linkage.
Some other well known private sector companies in which GPFG funds are invested include- Adani Ports and SEZ, Apollo Hospitals, Apollo Tyres, Arvind Ltd., Ashok Leyland, Asian Paints, Aurobindo Pharma, Bajaj Auto, Bharti Airtel, Biocon, Bluedart Express, Britannia Industries, Cadila Healthcare, Chennai Superkings Cricket Ltd., Cipla Ltd., Coffee Day, Colgate Palmolive India Ltd., Dabur India, Dr. Reddy's Laboratories, Godrej Industries, Grasim Industries, DishTV, Idea Cellular, India Bulls, Infosys Ltd., JSW Steel, Larsen & Toubro Ltd., Mahindra Holidays & Resorts Ltd., Mahindra & Mahindra Ltd., Maruti Suzuki Ltd., Monsanto India Ltd. Muthoot Finance Ltd., Piramal Enterprises, Raymond Ltd., Sun Pharmaceutical Industries Ltd., Thermax Ltd., Thomas Cook India Ltd., Titan Co. Ltd., TV18 Broadcast Ltd., United Breweries Ltd., Voltas, Wipro and Zee Entertainment Enterprises Ltd. to name a few (phew!).
Please click on India's outline on GPFG's global investment map to view the complete list of companies, the value of investment in each company in NOK and USD terms, the ownership and voting rights in each company. GPFG's investment in Indian equities was valued at NOK 66.3 billion or USD 8.1 billion at the end of 2017.
For example, the investment in Infosys Ltd. is almost USD 289 million, while it is USD 227 million in SBI, USD 189 million in TCS Ltd., USD 170 million in Tata Motors, USD 169 million in Reliance Industries, USD 149 million in Indus Ind Bank, USD 144 million in Cipla Ltd., USD 130 million in Apollo Tyres, USD 89 million in Adani Ports and SEZ and USD 41 million in TV18, to name a few (double phew!!)
Additionally, GPFG has invested in fixed income schemes in India in both the private and public sector entities such as Reliance Industries- USD 94.4 million and Rural Electrification Corporation Ltd - USD 4.8 million. GPFG has invested USD 3.4 billion in Government of India bonds as well.
Advocacy opportunities involving GPFG
Many activists working at the community level to demand accountability for the adverse impact of the operations of domestic and multi national corporations (MNCs) on human rights, public health and environment would do well to think of investors like GPFG/NB as a target for advocacy. For example, in 2006, the Council on Ethics recommended that Monsanto Co. be excluded from its investment universe of GPFG for using child labour in the field of hybrid cotton seeds production in India. Click here to read the recommendaiton. However, the Norwegian Ministry of Finance decided to engage with Monsanto for a limited period through Norges Bank to use its ownership rights to try and get the company to reduce dependence on child labour. In 2008, the Council on Ethics found that Monsanto had indeed taken tangible steps in this direction and that active ownership through GPFG had paid off unlike any other investor in the company who had paid serious attention to this issue. So the Council on Ethics decided to withdraw its recommendation to exclude Monsanto from the GPFG investment universe. However, according to a 2008 press release published on its website the Council and Norges Bank continue to monitor Monsanto.
This case study shows that environmental and human rights activists can send to the Council on Ethics, evidence of violation of human rights, severe environmental damage or corruption relating to any company operating in India in which NB has invested GPFG funds. When domestic remedies are slow or ineffective, this strategy could be explored. Click here for the contact details of GPFG's Council on Ethics.
Norwegian Government's enviable track record of transparency
Norwegian Government is one of the best examples of how transparent a government and its agencies can be if there is political will and a culture of openness that pervades the bureaucracy. S. Asian and African countries that have enacted laws to guarantee access to information could do well by emulating the good practices adopted by Norway. Their Government volunteers a wealth of information about its working in the public domain.
In October 2013, the Norwegian Ministry of Finance a recommendation from the Council on Ethics to exclude Sesa Sterlite from the GPFG's investment universe The title and date of receipt of this document are listed on Norwegian Government's latest version of their Electronic Records Database- e-Innsyn. Until recently it used to be called OEP. Any person may access this database of electronic records held by the national and local governments in Norway and place an order for them just like one would buy a book or any other product from Amazon.com. If the document is not covered by any exemption under Norway's access to information law, it will be delivered free of charge by email. I had used this facility in the past and obtained documents relating to India. This time I sought a copy of the 2013 document that the Council of Ethics sent to the Finance Ministry. The Norwegian Ministry of Finance emailed me the document within less than 24 hours of making the online request (see 1st and 3rd attachment).
Section 4(1)(b) of India's Right to Information Act, 2005 requires the Central and the State Governments to create such databases of hard copy and electronic records they hold in custody. Despite making tall claims about being an IT giant to anyone who is willing to listen, they have not deployed this technology to create a database like e-Innsyn. It does not cost the heaven and earth to create one. It does not have to be done in one day either. What is needed is a commitment to comply with a statutory obligation of proactive disclosure, a phased plan of action and some techies to create and maintain such a database.
The quick research behind this email alert was inspired by the piece published on The Wire about the aftermath of the Thoothukudi tragedy. Yes, I read articles published on this digital media platform, irrespective of the derision with which some "the country wants to know" choirboys of the establishment refer to it. Articles such as The Wire's give real food for thought and guide towards action. Shouting matches of the kind telecast on several 24x7 private satellite TV news channels are best relegated to stadiums and fish markets.
All facts mentioned in this piece are already in the public domain. Views expressed are personal.
CHRI trail of enquiry: Tilrådning Sesa Sterlite 2013 | Sterlite-GPFGExclusion-reiteration-unofftransl-2013 | Norway EInnsyn email May2018