Is the Government deliberately or otherwise helping the promoters of the Vedanta Group?


Smt Nirmala Sitharaman

Union Finance Minister

Dear Smt Sitharaman,

I refer to my last letter dated 26-2-2023 addressed to you on the subject (

I understand that the Board of Hindustan Zinc Ltd. (HZL) will be meeting shortly to take a decision on releasing the final dividend for 2022-23. In that connection, I wish to raise the following concerns:

  1. Considering that the government and the promoters of the Vedanta Group hold 29.5% and 64.92% equity holding in HZL respectively, for every one rupee dividend that the government gets, the Vedanta promoters get Rs 2.2. In other words, by declaring dividends, it is the Vedanta promoters that gain more than twice what the government gets.
  2. During the last nine years, as referred to in my letter dated 26-2-2023 cited above, the Ministry of Finance and the Ministry of Mines have been imprudent enough to allow more than Rs 69,770 Crores to be diverted from the internal resources of HZL by way of dividend payments, out of which the government may have got only Rs 20,500 Crores but the promoters of Vedanta have got the lion’s share of Rs 45,350 Crores.
  3. The quantum of dividends so declared by the HZL Board seems to be roughly comparable to the total profits (after tax) earned during the same time frame. In other words, the dividend payments approved by the Board have literally stripped the company of whatever internal resources it could have invested in exploration efforts, which ought to have been accorded the highest priority to ensure that zinc mining by the company remained sustainable.
  4. Such excessive dividend payments have hurt the intrinsic value of HZL in two ways. First, by losing its surplus resources, HZL has eroded its own intrinsic value. Second, by not investing enough resources in exploration, the company has lost an opportunity to add value to its mines. Both ways, HZL’s valuation has got adversely affected.
  5. There are reports that the Vedanta promoters are finding it difficult to raise enough resources to meet their high debt obligations on the one hand and for funding their ambitious expansion plans on the other hand, including their proposed semiconductor project in Gujarat with the Taiwanese company, Foxconn as a joint partner ( According to an MOU signed by Vedanta with the Gujarat Govt on 13-9-2022, Vedanta & Foxconn will have 60:40 shareholding in the Rs 1,54,000 Crore semiconductor project. However, according to a disclosure made by Foxconn to the London Stock Exchange (, the company has committed an investment of only US$ 118.7 million in the project. In other words, the Vedanta promoters will have to find their own resources to fill in the equity gap and also raise enough debt to finance Rs 1,54,000 Crores. By helping the Vedanta promoters to take away more than Rs 42,250 Crores from HZL as dividends, is the government indirectly granting an undue benefit to them?
  6. Almost immediately following Vedanta’s announcement to set up a semiconductor plant in Gujarat, I understand that the Union Cabinet met and decided to sanction a huge subsidy of 50% of the cost of semiconductor projects under the Ministry of Information Technology’s “Modified Scheme for Setting up of Semiconductor Fabs”, which implied that the government would cover half of the cost of the Vedanta-Foxconn project, once it is brought under that scheme. In addition, it appears that the Gujarat government also announced concessions in tax, land and other infrastructure facilities, which are equivalent to another 20% of the cost of the project. Would not these whopping concessions imply the government going out of the way to help the Vedanta Group to set up the project with the Indian taxpayers bearing a cost burden of more than Rs 1,00,000 Crores? Does it not also amount to an additional undue favour shown to Vedanta?
  7. But for a public outcry including my own letters to the Cabinet Secretary, the HZL Board, the majority of its directors representing the promoters, would have gone ahead with the proposed acquisition of Vedanta’s Mauritius-based zinc company, THL Zinc, with its accompanying liabilities, riddled with its own related party transactions, which would have diverted additional $ 3 billion (more than Rs 53,000 crores) from HZL’s internal resources to Vedanta’s promoters.
  8. The HZL Board resolution filed by Vedanta before the national stock exchanges involved a related party transaction. Under Section 188 of the Companies Act, Vedanta’s nominees on HZL’s Board ought to have recused themselves from passing a resolution on the acquisition of THL Zinc. HZL’s independent Directors themselves ought to have raised concerns. I have requested the Corporate Affairs Secretary to order an investigation into non-compliance on both these counts in my letter dated 5-3-2023 ( I am not sure whether that Ministry has acted at all and initiated action under the Companies Act.
  9. In spite of the multiple dimensions in which HZL’s intrinsic value has been allowed by the government to erode, your Ministry has been in an undue hurry to divest the government’s 29.5% stake in the HZL. Does it imply the government’s intention to undersell its stake in HZL, perhaps to hand it over on a silver platter to the Vedanta promoters?
  10. Considering that the zinc mineral resources in the country can at best last 20 years or so, and considering that zinc is a critically required mineral, is not the government acting in a highly hasty, imprudent manner to lose its control over it and allowing the available zinc resources to be subject to over-exploitation by profit-driven management?
  11. There are other related issues concerning the Vedanta Group, especially the findings of the Shah Commission, appointed by the Mines Ministry to look into irregularities in iron ore mining in Goa and other States, including infringement of the environmental laws and under-invoicing of ore exports. What is the status of the investigations conducted, if any, into it? Has there been regulatory forbearance?
  12. The present government went to the extraordinary extent of retrospectively amending the Foreign Contributions (Regulation) Act, 1976 to exempt the BJP and the Congress from an apex court’s judgement (in a case in which I was also a petitioner), which covered illegal political contributions to the two national political parties by foreign entities including Vedanta. While some of us have contested the legality of the amendment, it nevertheless points to the present government’s apparently close association with the promoters of the Vedanta Group (

These concerns point to a series of seemingly independent sets of concessions/ instances of regulatory forbearance, extended by the government to the Vedanta Group but, looking at them together suggests a well-orchestrated effort on the government’s part to force the Indian tax-payer to bear Vedanta’s debt burden to allow it to pursue its over-ambitious expansion programme. Is it a part of the present government’s plan, in Niti Ayog’s words, to groom a few private conglomerates into “global champions” (, a euphemism for outright crony capitalism?

I am afraid that the government needs to subject these concerns to independent scrutiny, as they raise issues of propriety and far-reaching public interest. Undue concessions extended to a private entity, whether monetary or otherwise, attract the provisions of the laws relevant to the prevention of corruption.

I am marking a copy of this letter to the C&AG for conducting a special audit so that its findings may be placed before the Parliament.

I am also circulating this letter widely to generate a public discussion and a debate, in view of the public interest concerns it raises.


Yours sincerely,

E A S Sarma
Former Secretary to the Government of India

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