Corporate Governance @ Production(Effluents): Coca-Cola , Plachimada
Plachimada is a little hamlet in Palakkad
District, which is known as the ‘rice bowl of Kerala.’ The majority of the
population consists of adivasis (indigenous people). The
primary occupation is agriculture. Data from the latest round
of the socio-economic census reveals that 60% of the population is engaged in
agriculture. This corresponds to 2,303 of the 3,802 people who are of
working-age in Perumatty,
The
Hindustan Coca-Cola Beverages Pvt. Ltd (HCCBPL), the Indian subsidiary of the Atlanta-based manufacturer of
aerated drinks in 1998, HCCBPL
acquired 34.4 acres of land (mostly paddy fields) in order to set up a bottling
plant at Plachimada. On January 25, 2000, the Perumatty Panchayat (a local
governing body whose constituency includes Plachimada) granted permission to
begin building the plant. In March 2000, operations began. The Kerala State
Pollution Control Board (KSPCB) granted the company a permit to produce 561,000
litres of beverage per day, with an average requirement of 3.8 litres of water
for a litre of beverage. The source of water was primarily groundwater from
about 6 bore wells and two open ponds, and about 2 million litres of water per
day was extracted.
Within six months of commencement of operations
at the plant, the villagers complained that the water was unsuitable for
drinking or cooking; it had turned milky white and was brackish. In the
subsequent months, several villagers complained of unusual stomachaches, while
farmers complained of wells emptying unusually fast and crop yields decreasing.
Corpwatch India, a public interest group, found that there were high levels of
calcium and magnesium in the water, caused by excessive extraction of water. The
bottle washing taking place at the plant involved chemicals, and the resulting
sludge was taken out of the plant. Initially the sludge was sold as fertilizer
to unsuspecting farmers, following which it was given free, and with increasing
resentment among villagers, it was merely dumped on the roadside. In the few
months since commencement, more than 1000 families in the surrounding villages
had been affected.
In August 2003, the
Delhi-based Center for Science and Environment (CSE) released numerous
statements about the presence of pesticide residues in many of the soft drinks
produced and sold by Coca-Cola in India. The presence of pesticide residues
added a greater human threat to the environmental damage caused by the plant.
Testing by the CSE revealed that pesticide levels in Coca-Cola products exceeded
global standards by 30-fold. The Indian Parliament responded by banning all
Coca-Cola and PepsiCo products in their own cafeterias, although they did not
ban the product from being sold in other locations in India.
Coca-Cola responded to
CSE's allegations by conducting various media campaigns, with the assistance of
public relations company Perfect Relations, to improve their image and to
assure the public of the safety and quality of their products. Tests by the
official government agencies revealed that 75% of major soft drink samples from
Coca-Cola and PepsiCo did not meet the standards set by the European Union for
pesticide residues. Although Coca-Cola's products met local standards, the
government moved to insist that both Coca-Cola and PepsiCo meet the stricter
standards set by the EU.
On August 19, 2005, the Kerala State Pollution
Control Board (KSPCB) rejected the application that had been pending with the
board since September 20, 2004, stating that “The Board had examined the sludge
generated by the Company and it was found that it was containing the heavy
metal cadmium at concentration of 200 to 300 mg per kg of sludge, which is 400
to 600% above the tolerance/permissible limit”. The KSPCB ordered the company
to immediately stop production.
In December 2003, in
response to the widespread nonviolent action waged against the Plachimada plant
that had spurred greater investigation into the plant's operations, the local
court in Plachimada ordered Coca-Cola to stop drawing groundwater for its
bottling operation on the grounds that it was illegal because of the grave
environmental damage it was inflicting on the local ecology. Although Coca-Cola
held legal ownership of the land, the court declared that the withdrawal of
110,000 gallons of water per day was beyond the "reasonable" limits.
The local court, however, did not have the legal power to order the facility to
completely shut down operation.
On November 16, 2005, the High Court yet again
demanded that the Panchayat to issue a license. But by then, new rules
established by the Kerala Groundwater (Control and Regulation) Act had taken
effect. And on November 19, 2005, the Water Resource Department included
Plachimada under the category ‘overexploited’, which prevented any further
extraction for commercial purposes. In January 2006, the company began
considering ways of moving operations from Plachimada, and no operations have
taken place at the plant since.
Mayilamma, who was a worker in the company,
joined the agitation after a year of its operation, and lead the movement from
forefront, when the local people noticed depletion and pollution of water in their
wells, expired on February 08, 2007.
In a
major development, a High Power Committee established by the state government
of Kerala in India has recommended on March 22, 2010, the World water Day, that Coca-Cola be held liable for Indian
Rupees 216 crore (US$ 48 million) for damages caused as a result of the
company’s bottling operations in Plachimada.
The
Coca-Cola bottling plant in Plachimada has remained shut down since March 2004
as a result of the community-led campaign in Plachimada challenging Coca-Cola’s
abuse of water resources. Validating the long term campaign against Coca-Cola,
the High Power Committee confirmed that the Coca-Cola company had violated a
number of laws in its reckless operations, including: Water (Prevention and
Control of Pollution) Act, 1974; The Environment (Protection) Act ,1986; The
Factories Act, 1948; Hazardous Waste (Management and Handling) Rules, 1989; The
SC-ST (Prevention of Atrocities) Act 1989; Indian Penal Code; Land Utilization
Order, 1967; The Kerala Ground Water (Control & Regulation) Act, 2002;
Indian Easement Act, 1882.
Coca-Cola, which in 2012 decided to invest $5
billion in India by 2020, has run into objections from local communities over
the use of groundwater. In 2015, it had to scrap plans for a new bottling plant
at Perundura in Tamil Nadu as local people protested, and in 2014, it had to
scrap a fully-built bottling unit in Mehdiganj in Uttar Pradesh as authorities
denied permission because local protests.
Beverage companies in India also
face strengthened groundwater rules, largely as a result of the campaign as
well as rulings of the National Green Tribunal, India’s green court. The
new rules will curtail groundwater usage for existing and proposed beverage
projects in water-stressed areas.
The Indian government is also
considering applying a “sin tax” on sugar-sweetened beverages, and the tax is
likely to become reality in 2016, further adding to the company’s problems.
If I was an
investor, I would steer clear of Coca-Cola both for financial and ethical
reasons. It is only a matter of time before their products, just like tobacco,
will be strictly regulated in order to restrict consumption.
Questions
1.
Define
a.
Business
Ethics
b.
Corporate
governance
c.
Stakeholders
d.
Effluent
2.
List
stakeholders of Coca-Cola, Plachimada unit
3.
Do
you think effluents from the Plachimada unit of Coca-cola adversely impacted
the local people? Why it should overweigh the social benefits like employment
and living standards provided by a MNC? Substantiate your answer.
4.
Which
authority can lawfully restrict use of water and under what law?
5.
Which
authority is empowered to take action against effluents dumping and under what
law?
References
1. https://www.ritimo.org/The-Plachimada-Struggle-against-Coca-Cola-in-Southern-India
7.. https://blog.ipleaders.in/an-overview-law-of-easements-in-india/
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