Business | General
India puts skids on Vedanta expansion
Vedanta, controlled by billionaire Anil Agarwal, has been waiting for permission to develop reserves of bauxite, used to make aluminum, in Orissa's Niyamgiri hills for more than four years
- Bloomberg
- Published: 00:00 August 25, 2010
- Image Credit: Reuters
- The Vedanta office building in Mumbai. Shares of Vedanta Resources fell to a 10-month low in London trading, dropping as much as 5.4 per cent to 1,927 pence, on news that the Indian government had rejected its bid to mine bauxite in the state of Orissa.
Mumbai: India rejected Vedanta Resources's proposal to mine bauxite in the eastern state of Orissa and may scrap environment clearance for its existing aluminum refinery, hampering a planned $8 billion (Dh29.3 billion) expansion.
Vedanta, controlled by billionaire Anil Agarwal, has been waiting for permission to develop reserves of bauxite, used to make aluminum, in Orissa's Niyamgiri hills for more than four years. In June, the environment ministry started to investigate how mining would affect tribes and wildlife in the area. The mining plan was rejected by the ministry yesterday.
The company's 1-million tonne refinery may also be taking bauxite from mines without environmental approval, so Vedanta needs to show why the permit for the refinery should not be cancelled, minister for environment and forests Jairam Ramesh said yesterday in New Delhi.
"There are very serious violations of environment act and forest right act," Ramesh said, adding that the company may face legal action.
Shares of Vedanta Resources fell to a 10-month low in London trading, dropping as much as 5.4 per cent to 1,927 pence. The shares were at 1,941 pence as of 8.36 am local time. Sterlite Industries, which owns about 30 per cent of unit Vedanta Aluminium, fell as much as 4.9 per cent, the lowest in almost three months, to 150.80 rupees (Dh11.87) and traded at 150.90 rupees as of 1.08 pm in Mumbai.
Vedanta Aluminium spokesman Bibek Chattopadhyay declined to comment on the government's decision, saying he has yet to see the statement.
"Vedanta will need its own source of bauxite to successfully implement the project," said Giriraj Daga, an analyst at Khandwala Securities in Mumbai. "If not Niyamgiri, it will have to seek some other sources."
Vedanta Aluminium had plans to use bauxite from the proposed mine to run its alumina refinery in the region. The mine will help the company cut raw material costs. It produced 762,000 metric tonnes of alumina in the year ended March 31.
Smelter capacity
The company on August 10 won approval for a 375-billion rupee ($8 billion) expansion from the Orissa government to increase its smelter capacity six-fold to 1.6 million tonnes and refinery capacity also by six-fold to 6 million tonnes.
"Allowing mining in the proposed lease area by depriving two primitive tribal groups of their rights over the proposed mining sites in order to benefit a private company would shake the faith of tribal people in the laws of the land," the four-member panel said in its report on August 16.
The company has violated laws including the Forest Conservation Act and the Environment Protection Act, the 119-page report said.
Vedanta Resources said last month it may begin mining at the Niyamgiri mountains site as early as the end of the year.
"All is going well," Vedanta chief executive officer Mahendra Singh Mehta said in an interview in London on July 30. "It shouldn't take more than three weeks for the government to decide" on approvals after it receives an environment ministry report scheduled for this month.
Separately, a decision on the proposed $12-billion iron ore mine and steel mill by South Korea's Posco is also to be taken after a government panel submits a report by the end of September, Ramesh said.
"Posco is closely observing the situation there," Chung Jae Woong, a spokesman for the Pohang, South Korea-based company, said by phone from Seoul yesterday.
Green criteria: Posco awaits report
India will decide on granting environment approval for Posco's planned $12-billion (Dh44 billion) plant in the eastern state of Orissa after a government report is submitted by the end of next month.
The Posco project does not involve tribal issues, environment minister Jairam Ramesh said in New Delhi yesterday. The plant proposed by South Korea's biggest steelmaker has been delayed since 2005 because of opposition from farmers unwilling to give up their land and livelihood. Proposals by the world's largest steelmaker ArcelorMittal to set up a $10-billion factory each in Orissa and neighbouring Jharkhand state have also been thwarted because of delays in land acquisition.
Orissa chief minister Naveen Patnaik has sought Prime Minister Manmohan Singh's help in securing environment approvals for Posco's steel mill, billed as the single-biggest overseas investment in India. The Prime Minister said the project will be expedited, Patnaik told reporters in New Delhi after meeting Singh.
"I promise to hasten the committee's report," Ramesh told reporters in New Delhi.
More from Business General
More from Business
Business Editor's choice
-
China breaks West's solar monopoly
Some countries in the world, especially Germany and the United States, have made considerable efforts to invest in developing solar energy cells
-
Burberry store spree will cut profit
Trenchcoat maker forges ahead with investment strategy targeting emerging markets
-
Laws needed to spur region bond markets
UAE Central Bank calls for creation of a centralised Sharia board to facilitate the sale of sukuk
