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Norsk Hydro's Utkal venture in Orissa, India

Terjesen, Siri A. (2003) Norsk Hydro's Utkal venture in Orissa, India. In Gooderham, Paul & Nordhaug, Odd (Eds.) International Management: Cross-Boundary Challenges. Blackwell Publishing, Malden, MA, pp. 356-382.

Abstract

This paper will begin with a brief overview of the Norsk Hydro ASA’s (hereinafter Hydro) Utkal Alumina International (hereinafter Utkal) project in Orissa, India, followed by cultural and ethical analyses and recommendations for next steps. Previous research suggests that corporations desire practitioner insights on this intersection of culture and ethics (Donaldson, 1989, Dubinsky and Loken 1989, Vogel 1992, Robertson and Fadil 1997). Theory will be balanced with press releases and personal interviews with Hydro corporate offices and NGO/watch groups. The case is set in June 2001 when Hydro was still a 45% shareholder. The focus will be limited to Hydro though other joint venture partners are Canadian Alcan and the Indian Aluminum Company, Indal (owned by conglomerate Indian business house Hindalco), with 35% and 20% ownership respectively.

Hydro was selected as this multinational corporation (MNC) has begun to engage in rigorous dialogue regarding ethical challenges and corporate social responsibility (CSR). The Utkal project site juxtaposes this ethical rhetoric with the real and continual dilemmas faced since project inception in 1993. In 2001, Indian police killed three villagers and severely injured eight others during a non-violent protest of Utkal activities.

Case Overview: With an investment of US $1 billion, the Utkal project will establish a bauxite mine at the Baphlimali plateau and an alumina-refining factory in the Rayagada district of Orissa, East India.

The project is expected to supply over thirty years of alumina production for export: 1 million tons in the first phase and 2.5 million tons during the second phase. This will extract an estimated 173 million tons over a thirty-year period. These alumina exports will help to meet the burgeoning international demand (4-5% yearly increase) for this strong, ductile light metal. Utkal implementation is expected to begin in mid-2001, with the first production milestone set for 2005.

Meanwhile, the Utkal venture has stirred massive international controversy due to the potential human and environmental consequences. In order to acquire land, 750 people in three villages (Kucheipadar, Korala, and Komphora) will be forced to move from their homes. Approximately five hundred others will lose land and tens of villages will have reduced access to common resources such as water and agricultural and grazing lands. In total, NGOs estimate 60,000 people will be directly or indirectly negatively impacted by the Utkal venture. Most of these local inhabitants are farmers and approximately 60% percent belong to native tribes in the lowest Hindu castes. Within the eastern state of Orissa (where the Utkal venture is located), 44% of the population live below the poverty line, 51% are illiterate, and 47% do not have access to electricity, safe drinking water, and toilets. Overall, India is ranked 129th of 174 countries on the UNDP survey of human development which account for well-being components such as life expectancy, education, and gender equality. This low placement is due in part to limited government spending (just 5.1% of GDP) on health and education. (See Appendix 1 for quality of life data. See Appendices 2 and 3 for macroeconomic details.)

Environmental groups are also concerned with the effects to the land. Estimates differ. The watch group, One World, claims that the 1,750 hectares needed for facilities would result in the razing of 100 hills to the ground, and the drying up of 700 streams and numerous forests and grasslands as an area of 130,081 hectares morphs into a "barren desert." Meanwhile, Utkal contends that a far smaller area of land will be raised and only 10% of the Bahra Nadi river (in the driest year) could be used. Utkal planted approximately 80,000 trees in the year 2000. They expect to plant a few million trees in the area. Moreover, the estimated 2 million tones of industrial sludge produced each year will silt up potable water resources and other reservoirs. Utkal contends that there will be no silting of resources, the project will utilise dry stacking with liners and collection pond and water recycling. Norwegian consultants from the Christian Michelsen Institute (CMI) initially approved the environmental assessment. However, CMI’s request for more time to perform a complete analysis of social impacts was denied. Utkal’s sponsors are no strangers to previous environmental catastrophes. The Indian State Pollution Control Board reports that Indal’s Hirakud plant emits .5 million kg of fluorine each year—contaminating shallow ground water and soil. Hydro’s S&S PVC-compound plant in Tamil Nadu, South India, was found to have "two sets" of standards governing health, safety, and the environment. In this case, Norwatch reported the use of cadmium in the production process, the provision of asbestos gloves for workers, and the lack of an adequate waste treatment center. All of these conditions are permissible in India, but outlawed in Norway.

Government institutions (with or without proper resource and borrowing privileges) approved the project, and police and local "authorities" have attempted to quell the non-violent village protestors. Increasingly violent measures have been used to force villagers to sign away land against their will at minimal, if any, repayment. Meanwhile, Hydro’s promises to provide jobs, enable open communication, protect and enhance human welfare have generally fallen far short of expectations. Hydro contends that international NGOs have teamed with local organizations to oppose the development on political and ideological grounds.

Impact and interest:

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ID Code: 4384
Item Type: Book Chapter
Additional URLs:
Keywords: Norsk Hydro, Business Ethics, India, Culture, Human Rights, Minerals, Equity
ISBN: 9780631233428
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2003 Blackwell Publishing
Copyright Statement: The definite version is available on publication at www3.interscience.wiley.com
Deposited On: 30 May 2006
Last Modified: 05 Jan 2011 23:26

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