Union Carbide's Indian Investment: Why India?

Union Carbide India Limited (UCIL) was a chemical company founded in 1934 as a subsidiary of the American Union Carbide Corporation (UCC). UCIL was jointly owned by UCC and Indian investors, including the Government of India and government-controlled banks. UCIL operated a pesticide plant in Bhopal, Madhya Pradesh, which opened in 1969. The plant was built next to a densely populated neighbourhood and a busy railway station, violating the 1975 Bhopal Development Plan, which stipulated that hazardous industries should be located away from densely populated areas. On December 3, 1984, a gas leak occurred at the Bhopal plant, releasing methyl isocyanate (MIC) gas and killing thousands of people, with many more suffering long-term health effects. This tragedy brought attention to the reasons why UCC had chosen to invest in India and set up the UCIL subsidiary.

Union Carbide's pesticide plant in Bhopal

Union Carbide India Limited (UCIL) was a chemical company founded in 1934. It was owned by Union Carbide (50.9%) and Carbon Corporation (UCC) (49.1%), with the remaining shares held by Indian investors, including the Government of India and government-controlled banks. UCIL produced a range of products, including pesticides, batteries, plastics, and industrial chemicals.

In 1969, UCIL opened a pesticide plant in Bhopal, the capital of Madhya Pradesh, India. The plant manufactured pesticides and herbicides, primarily using the insecticide carbaryl, which is produced using the base chemical methyl isocyanate (MIC). Initially, the plant imported MIC, but in 1979, the company decided to manufacture it on-site, building an MIC unit within the Bhopal plant.

The location of the plant in a densely populated area violated the 1975 Bhopal Development Plan, which stipulated that hazardous industries should be located away from populated areas. Despite this, the company gained approval from centralised governing authorities. In 1982, auditors warned of a possible 'runaway reaction', but their concerns were not heeded.

On the night of December 2-3, 1984, a gas leak occurred at the Bhopal plant, exposing over 500,000 people to toxic gases, including MIC. The exact cause of the leak is disputed, with some attributing it to a series of operational errors and others suggesting intentional sabotage by a plant worker. The gas leak had catastrophic consequences, killing thousands of people and harming hundreds of thousands more. The official death toll remains disputed, with estimates ranging from 5,000 to 25,000 or more. Many survivors developed chronic illnesses, including cancer, respiratory issues, gastrointestinal problems, and neurological disorders.

The aftermath of the disaster was marked by a lengthy legal battle, with organisations representing the victims filing a $10 billion injury claim against Union Carbide. The Indian government also filed a $3.3 billion claim. Union Carbide denied responsibility and offered a significantly lower settlement, which was rejected. In 1989, the company agreed to pay $470 million as a final settlement, though many victims felt this amount was inadequate.

The site of the UCIL factory in Bhopal remains contaminated, with hazardous waste and toxic materials still present decades after the disaster. Studies have shown contamination of the soil and groundwater, impacting the health of residents and causing environmental devastation. The inadequate compensation and lack of proper clean-up efforts have led to ongoing protests and demands for justice from survivors and activist groups.

The 1984 Bhopal disaster

The Bhopal disaster was a chemical leak that occurred on the night of December 2-3, 1984, at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal, Madhya Pradesh, India. It is considered the world's worst industrial disaster.

The Disaster

Over 500,000 people in Bhopal were exposed to the highly toxic gas methyl isocyanate (MIC). The official number of immediate deaths is 2,259, but estimates vary, with some sources claiming the figure is as high as 10,000. The Government of Madhya Pradesh confirmed a total of 16,000 deaths related to the gas release, and it is estimated that 8,000 more have died from gas-related diseases in the years since.

The Cause

The UCIL factory was built in 1969 to produce the pesticide Sevin, using MIC as an intermediate. An MIC production plant was added to the site in 1979. The chemical process employed in the Bhopal plant involved methylamine reacting with phosgene to form MIC, which was then reacted with 1-naphthol to form the final product, carbaryl.

In the months leading up to the leak in December, liquid MIC production was in progress, and three underground 68,000-litre liquid MIC storage tanks were being filled. However, in late October 1984, one of the tanks, E610, lost the ability to contain its nitrogen gas pressure, meaning the liquid MIC could not be pumped out. Shortly after, MIC production was halted, and parts of the plant were shut down for maintenance. This included the shutdown of the flare tower, which was undergoing repairs to a corroded pipe.

By early December, most of the plant's MIC-related safety systems were malfunctioning, and many valves and lines were in poor condition. During the late evening of December 2, water entered tank E610, reacting with the 42 tons of MIC inside. The introduction of water into the tank resulted in a runaway exothermic reaction, accelerated by contaminants, high ambient temperatures, and the presence of iron from corroding non-stainless steel pipelines. The pressure in the tank continued to increase, and at around 1 am on December 3, a safety valve gave way, sending a plume of MIC gas into the air.

The Aftermath

The final death toll is estimated to be between 15,000 and 20,000, with some 500,000 survivors suffering from respiratory problems, blindness, and other health issues. In 1989, Union Carbide agreed to pay $470 million in compensation, and in 1994, the company sold its stake in UCIL to Eveready Industries India Limited (EIIL).

In 2010, seven former employees of UCIL, all Indian nationals, were convicted of causing death by negligence and sentenced to two years' imprisonment and a fine of about $2,000 each.

Union Carbide India Limited (UCIL)

UCIL operated a pesticide plant in Bhopal, Madhya Pradesh, which opened in 1969. The plant used the chemical methyl isocyanate (MIC) to produce pesticides and herbicides. On the night of December 2, 1984, a gas leak occurred at the plant, exposing over 500,000 people to toxic gases, including MIC. The leak killed thousands of people and caused chronic illnesses in hundreds of thousands more. The Government of Madhya Pradesh confirmed a total of 16,000 deaths related to the gas release, with an estimated 40,000 people left permanently disabled or suffering from serious illnesses.

In the aftermath of the disaster, lawsuits were filed against UCIL and UCC by representatives of the victims and the Indian government. In 1989, the Supreme Court of India ordered UCC and UCIL to pay $470 million in compensation to the victims. Following the tragedy, UCC sold its entire stake in UCIL, and the company was renamed Eveready Industries India Limited. The proceeds from the sale were used to fund a hospital in Bhopal to care for the victims.

The Indian government's response

In the years following the disaster, the Indian government passed several pieces of legislation to support victims, including the Bhopal Gas Leak Disaster Act in March 1985, which gave the government the right to represent all victims, and the Bhopal Gas Leak Act in 1985, which began legal proceedings. The government also provided immediate relief in the form of food distribution and ration cards, as well as widow pensions and financial support for families with low incomes.

In 1991, the local Bhopal authorities charged Warren Anderson, UCC CEO at the time of the disaster, with manslaughter, but the US declined to extradite him, citing a lack of evidence. The Indian government continued to pursue legal action against UCC and its employees, and in 2010, seven former employees of UCIL, including the former chairman, were convicted of causing death by negligence and sentenced to two years' imprisonment and fined.

In terms of addressing the environmental impact of the disaster, the Indian government has been criticised for failing to adequately clean up the site and address ongoing contamination. In 2008, the government of Madhya Pradesh paid compensation to family members of victims killed in the gas release and to injured victims. In 2012, the Supreme Court ordered the government to release any remaining settlement funds to victims.

Overall, the Indian government's response to the Bhopal disaster involved a combination of legal, financial, and medical support for victims, as well as efforts to hold UCC and its employees accountable. However, the government has been criticised for failing to adequately address the environmental impact of the disaster and for protecting corporate interests over human lives.

The economic impact on Union Carbide

The economic impact of the Bhopal gas leak on Union Carbide was significant. The company was forced to pay $470 million in compensation to the victims of the accident, which broke down to 43 cents per share. This amount was criticised for being disproportionately small compared to the company's earnings per share, which, in 1988, were a record $4.88.

In the aftermath of the tragedy, Union Carbide became the target of hostile takeover attempts and was forced to sell off many of its most profitable brands, including Glad Trashbags and Eveready Batteries, to pay off its debts. The company's public image never fully recovered from the incident, and it was eventually acquired by Dow Chemical in 1999 for $8.89 billion, with the deal valued at $11.6 billion by the time it was completed in 2001.

The economic fallout from the Bhopal disaster was not limited to Union Carbide's balance sheet. The incident had far-reaching consequences for the Indian economy as well. The Indian government filed a $3.3 billion claim against Union Carbide, which was settled for a fraction of that amount. The proceeds from the sale of Union Carbide's stake in UCIL were placed in a trust to fund a hospital in Bhopal to care for the victims of the tragedy. The Indian government's efforts to provide medical relief and disaster management in the wake of the leak also strained its resources.

The economic impact of the Bhopal gas leak extended beyond Union Carbide and India. The incident sparked a global debate about industrial hazards and corporate responsibility, leading to increased scrutiny of chemical companies and their safety practices. The disaster also highlighted the complexities of global supply chains and the potential risks associated with operating in emerging markets. The economic fallout from the Bhopal leak had far-reaching consequences and contributed to a heightened focus on ethical business practices and corporate social responsibility.

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