India court orders closure of Vedanta smelter

The Business of Mining - thebusinessofmining.com | September 29, 2010 | 10:03 am Base Metals Copper 

“Vedanta, the London-listed company founded by billionaire Anil Agarwal, has suffered a fresh blow in India, where a court has ordered the immediate shutdown of its massive copper smelter in the south, citing violation of environmental laws in a sensitive coastal area.


Tuesday’s ruling by the Madras High Court came a month after India’s environment ministry rejected Vedanta’s plans to mine bauxite in the eastern state of Orissa, and during a sensitive time as New Delhi is considering whether to allow Vedanta to take a $9.6bn controlling stake in Cairn India, a rival which operates lucrative and strategically important oilfields in the northern state of Rajasthan.

The copper smelter in question is the Tuticorin plant in the state of Tamil Nadu, which has been operating for more than 12 years and which Vedanta has been planning to expand.”

Source: Financial Times, September 29, 2010

Observations:

  • The copper smelter was forced to close because of emitting noxious air pollution and high levels of heavy metals, arsenic, and fluorides in the waste, leaking into the groundwater.
  • In the last months, Vedanta has also been in conflict with the government because of alleged mining on tribal lands before permits were obtained and buying ore from illegal mines. These conflicts arise from a new ethics law for the mining industry passed on spring of this year.

Implications:

  • 12 Year old processing plant typically don’t suddenly become more polluting, although an operational mistake might have led to temporary high levels of emissions. It therefore appears to be a change of policy of the Indian government (& court) that the plant has been forced to shut down.
  • The vigor of the Indian implementation of the new standards has surprised many experts, including the Vedanta board. However, it is clear that the competitive advantage Vedanta enjoyed because of less environmental pressure in India is coming to an end.

©2010 | Wilfred Visser | thebusinessofmining.com

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