Sterlite plant closure could spawn copper shortages nation-wide; imports to cost around $3 billion in forex annually

Post the Tamil Nadu government's move to shut Vedanta Resources' copper smelter in the Thoothukudi district, the country is likely to face a shortage of copper that will eventually lead to a rise in the prices of the metal.

The closure of Sterlite Copper's plant in Thoothukudi will cut India’s copper production by about half, spurring imports, according to Bloomberg. In financial year 2017-18, Vedanta produced about 48 percent of the country’s total copper output.

“If the closure is permanent, then what we expected to happen two years down the line will happen with immediate effect,” Jayanta Roy, senior vice president at ICRA Ltd told Bloomberg.

Analysts believe that the shortage of copper will lead to a rise in prices by up to two percent from the current level of around Rs 455 per kg. According to Business Today, imports would cost India around $3 billion in forex annually.

Police stand gurad outside a copper smelter controlled by Vedanta Resources in Thoothukudi. Reuters

The Thoothukudi district has been witnessing several protests for some weeks by locals and others against the Sterlite Copper plant and its proposed expansion. The Tamil Nadu government took the decision to shut the plant following the death of 13 people in police firing during protests against the continued functioning of the unit.

The Tamil Nadu government order said it has been brought to its notice that the Tamil Nadu Pollution Control Board (TNPCB) did not renew the 'Consent to Operate' to the copper smelter plant in Thoothukudi by its order of 9 April this year and subsequently on 23 May, the PCB issued directions for closure and disconnection of power supply to the plant.

"Under Sections 18(1)(B) of the Water Act, 1974 in the larger public interest, the Government endorses the closure direction of the TNPCB and also directs the TNPCB to seal the unit and close the plant permanently," said the Order.

Vedanta had suspended output from the plant in March for maintenance. On 18 May, Vedanta said the shut down of its South Indian copper smelter, one of India’s biggest, was causing a copper deficit, Reuters reported. The facility has been shut since March 27 when the company took up annual scheduled maintenance, a PTI report said.

The smelter, located in a sleepy port city near the tip of the Indian peninsula, has a share of about 35 percent in India’s primary copper market and exports mainly to Gulf and Asian countries.

With inputs from IANS