Vedanta's cup of woes brimmeth over

By Sandeep Sahu

Bhubaneswar: Exactly five years after Vedanta Aluminium Limited (VAL) commissioned its one million tonne per annum (MTPA) refinery at Lanjigarh in Odisha’s Kalahandi district and two years after its proposed expansion of capacity to 6 MTPA was shot down by Central diktat, it has had to shut down the refinery altogether. The reason: no bauxite is left in its stockyard to run the plant that needs a small matter of 10, 000 tons of it daily.

Though VAL has already served the mandatory three-month closure notice for the refinery to the Odisha government on 6 September, Saturday’s sudden closure came as a bit of a surprise because there were reports that the company had made arrangements to source about 90, 000 tonnes of bauxite from Gujarat to tide over the immediate crisis.

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“We had no choice but to shut down the refinery-and the 0.5 MTPA smelter at Jharsuguda with it-since the bauxite consignment from Gujarat is unlikely to arrive before the last week of October,” a VAL spokesperson told Firstpost by way of an explanation for this rather unexpected development.[caption id=“attachment_489563” align=“alignleft” width=“380”]  Trouble for Vedanta. Reuters[/caption]

In a way, the denouement was waiting to happen. Even at its present capacity of 1 MTPA, there was no way the refinery could have run for any length of time without the company laying its hands on the abundant reserves of bauxite on the Niyamgiri hills on whose foothills the refinery is located. With many of the bauxite mines in Jharkhand, Chhattisgarh and Andhra Pradesh (the bulk of them in Jharkhand) which used to supply raw material for the plant running into green hurdles and Gujarat deciding to export bauxite rather than auction it as it used to do earlier, sourcing of raw material from outside has become increasingly difficult for Vedanta. The small quantity of bauxite from the captive mines of Balco in neighbouring Chhattisgarh (taken over by Vedanta) was grossly inadequate to meet the raw material requirement of the refinery. And with no alumina being produced at the refinery, there was no way the .5 MTPA smelter at Jharsuguda could keep running.

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As per a joint venture agreement it has signed with the Odisha Mining Corporation (OMC), the lessee of the Niyamgiri bauxite mines, VAL had been promised 150 million tons of bauxite over the next 30 years. But some spirited green activism on the one hand and an aggressive Ministry of Environment and Forests (MoEF) on the other have combined to ensure that it did not get even an ounce of it from the bauxite-rich Niyamgiri hills, which was the very raison d’tre for setting up the refinery in Lanjigarh in the first place. On its part, Vedanta did not help matters by flouting a number of environmental laws and conditions imposed by the MoEF while giving stage-1 clearance for the plant. The violations made it possible for the NC Saxena Committee appointed by MoEF during Jairam Ramesh’ stint as the minister to recommend denial of permission for mining in the hills held sacred by the primitive Dongria Kondhs who inhabit the area.

VAL believes the Saxena Committee did a ‘hatchet job’ in refusing permission for mining. “After an earlier three-member committee comprising Usha Ramanathan, Vinod Rishi and JK Tiwari gave conditional clearance for mining, the forces ranged against us got to work and managed to get the MoEF to appoint the four-member committee headed by NC Saxena to overrule the earlier recommendation,” says a senior VAL official who does not want to be named.

Predictably, OMC challenged the denial of permission for mining by the MoEF on 24 August, 2010 in the Supreme Court which, by the way, had granted clearance for diversion of 660.749 hectares for bauxite mining with a host of conditions on 8 August 2008. In denying permission for mining, the MoEF, in a way, had overruled and circumvented the Supreme Court judgment delivered by a division bench consisting of then Chief Justice of India (CJI) Justice KG Balakrishnan, Justice Arijit Pasayat and Justice SH Kapadia. OMC’s appeal is still being heard in the apex court.

But why has the MoEF under the UPA regime worked overtime to throw a spanner in the plans of Vedanta in the first place? The question brings us to the politics of it. Significantly, the denial of mining permission by Ramesh came just two days after Rahul Gandhi, at a public meeting on the foothills of Niyamgiri, had appointed himself as the ‘sipahi’ of the local tribals in New Delhi and had assured them that he would do everything possible to ensure that they are not uprooted from the hills they hold sacred. With the Gandhi family scion ranged firmly on the side of the tribes, there was no way Ramesh-or for that matter any minister in the UPA government-could have given Vedanta the go-ahead. That the UPA government was determined to scuttle VAL’s plans became clearer when Ramesh gave forest clearance to the Posco project, though with several conditions, a day before laying down office as the environment minister.

On its part, the Naveen Patnaik government, after having shut its eyes to all the violations by Vedanta in the initial days and letting it go ahead with the expansion of its refinery to 6 MTPA without even waiting for clearance from the MoEF, has now completely washed its hands off. A day after Naveen assured a delegation of VAL employees that he would do ’everything possible’ to ensure that the refinery does not shut down, chief secretary Bijay Kumar Patnaik said the state government was ‘in no position’ to supply bauxite immediately to keep the refinery going. Having already spent nearly Rs 50, 000 crore-Rs 35, 000 crore on the smelter at Jharsuguda, Rs 10, 000 crore on the refinery at Lanjigarh and Rs 5, 000 crore on other ancillary work-Vedanta certainly has reasons to feel cheated because the whole investment was premised on the state government’s assurance of uninterrupted supply of bauxite to run the refinery and-by extension-the smelter.

Apart from the UPA government which has made no secret of its hostility towards Vedanta and the BJD government which has chosen to leave the company in a lurch, the aluminium major also has to contend with its international rivals known to have funded the global campaign against VAL. If market analysts are to be believed, Vedanta could emerge as the biggest-and more importantly, cheapest-producer of aluminium if it manages to lay its hands on the Niyamgiri hills.

Right now, however, that looks a distant pipedream. Far from becoming the world leader in aluminium production, Vedanta could actually end up meeting its Waterloo in Odisha if the Supreme Court verdict goes against it.