Alistair Dawber: Vedanta's failure to speak out earlier could cost it dearly

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The Independent Online

If, as Vedanta claims, the allegations against it from human rights groups such as Survival and Amnesty are "lies and hoax", the list of those to have been deceived includes the Norwegian state pension fund, their counterparts in the Netherlands and the Church of England.

And yesterday another name could be added to that list: Jairam Ramesh, India's environment minister. He claimed that the company is liable for "serious violations of environment protection acts" in its efforts to build a bauxite mine in the Nyamgiri Hills, home to the Dongria Kondh tribe, in the east Indian state of Orissa.

But the tide had started to turn against Vedanta long before Ramesh's decision, when those illustrious investors sold their stakes in the FTSE 100 mining company. Vedanta had failed to persuade them that it took concerns about the project seriously, in spite of widespread objections on human and environmental grounds. Each announcement about selling the shares was greeted with a "no comment" from Vedanta.

To begin with, the policy of stonewalling worked. Vedanta has enjoyed the support of the local government in Orissa, and in 2008 won approval from the project from India's Supreme Court. Highly public moves by groups such as the Church may have been an embarrassment, but with support at home and from big City institutions, which have seen huge returns from owning Vedanta shares, the group has been able to press ahead with confidence.

In many cases, it has not been Vedanta's record that has been at issue. The Church said it sold its shares because the company failed to answer questions raised by pressure groups. Vedanta claims that representatives of the Church spent three days touring the Orissa sites, and had been impressed. The Church said its comments referred to Vedanta's facilities, and not the social impact of the group's operations.

In recent months, Vedanta has realised that its policy of refusing to engage with critical investors, the media and pressure groups was not working as the protests began to filter through to City investors, some of whom have got nervous about holding the stock.

Pirc, a pressure group that promotes shareholder interests, urged investors to vote against the company on several motions during its annual general meeting last month. Pirc accused the company of having a poor safety record – there have been 41 employee and contractor fatalities in the last year at Vedanta sites, it says – and of failing to communicate properly with investors. All the motions were passed in the company's favour, but with significant votes against, not least on some by Aviva, the huge City investor.

In an interview with The Independent last month, Vedanta's chief executive M S Mehta said: "Maybe we've been naive not to talk more in the past, but I would not like to hazard a guess about why Vedanta is targeted in this way. We have provided schools, hospitals and infrastructure for the Dongria Kondh and have offered financial support far beyond the necessary levels."

Vedanta's belated efforts to persuade stakeholders that the bauxite project could be considered "eco-mining" and that there was "hardly any impact" on the local water supply were firmly rejected by Mr Ramesh.

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