It will be interesting to see what happens now with Vedanta Resources Plc in India. For my money, it’s too early yet to join the crowing of activist and human rights organizations celebrating the 24 August orders of the ministry of environment and forests. The orders denied a Vedanta subsidiary final clearance to mine the Niyamgiri Hills of Orissa for bauxite.
This hurts Vedanta. The subsidiary, Sterlite Industries (India) Ltd, in a venture with state-run Orissa Mining Corp. Ltd, had hoped to mine the bauxite to feed Vedanta’s existing alumina refinery in Lanjigarh in the shadow of the Niyamgiri range. Secondly, the ministry has also put on hold the refinery’s expansion plans. And, thirdly, the ministry virtually banned import of ore from Jharkhand for the project, saying most mines Vedanta had contracted with are illegal. Vedanta trucks in ore from neighbouring Jharkhand to feed existing capacity to produce calcined alumina, used for captive consumption in plants elsewhere.
It couldn’t be pleasant viewing either for Vedanta officials to see Congress heir-apparent Rahul Gandhi chopper in to Lanjigarh in Kalahandi district two days after the ministry’s order, to address a rally in support of the area’s Dongria Kondh tribals who consider the hills holy, the abode of Niyam Raja, their god. Gandhi’s pit-stop at Jagannathpur just down the road from Lanjigarh was tellingly near the tiny mud-thatch-and-tile hut of Kumti Majhi, leader of Niyamgiri Surakhya Samiti that has for long protested mining incursions.
He may have noticed the resoluteness of the locals to deny Vedanta the hill at any cost: Not far from Majhi’s hut is the unfinished conveyor belt to bring bauxite ore from the hills to the refinery, which the Dongria Kondh have prevented Vedanta from completing.
All this is of considerable embarrassment to both Vedanta and the Orissa government, but I’m waiting to see what change-rabbit Vedanta will pull from its deep hat. According to its own figures, it has spent nearly $900 million (around Rs.4,220 crore) till September on the existing refinery; and put down over $400 million for the expansion, close to one-third of the projected cost.
This would not cover, say, establishment cost of the sort that permitted Vedanta a series of assumptions, of which assuming it would get past forest conservation laws is only a minor one. It permitted the assumption of setting up its 1.4 million tonnes per annum (mtpa) alumina refinery; indeed, with the further assumption of expanding its capacity by 3 mtpa. This was done with the assumption Vedanta and its mining partner, the Orissa government, would be able to cast aside the need for views or objections—which in human rights parlance is called Free, Prior and Informed Consent—of the several thousand Dongria Kondh as to the fate of their bauxite mother lode of a holy hill and the 200 or so hamlets that dot the Niyamgiri range.
In its interim report for 2010, Vedanta declared: “We are in a state of preparedness to commence the mining of Niyamgiri bauxite on receipt of final government clearances, expected in the current financial year. Progress on the 3 mtpa refinery expansion project and the 0.6 mtpa debottlenecking project at Lanjigarh is on schedule for commissioning.”
This comes either from foreknowledge of how things work in India, or foolishness that, as a global corporation, it would be immune to the pressures of growing global activism, investor ethics, and the occasional, though inexplicably late, do-right by India’s environment mandarins.
An outcome favouring Vedanta will, of course, play into conspiracy theories that permeate this cause célèbre of the convergence of business and human rights. But the point is: It will require great momentum to check Vedanta. According to a presentation Vedanta made to investors last year, Lanjigarh and a 60km radius around it contains reserves of around 900 mt of high-grade bauxite, or around 60% of Orissa’s recoverable reserves.
This may be too much for Vedanta to pass up. It will also be too much for a buyer, should Vedanta in an unlikely worst-case scenario sell its plant to a competing metals interest.
It will be interesting to see if the ministry has the brass wherewithal to hold its position, let alone build on the Vedanta episode to query every major—and equally rampant—metals and mining project in other parts of Orissa, Jharkhand, Chhattisgarh and Karnataka that are in the stages of prospecting, land acquisition and initial construction.
Sudeep Chakravarti writes on issues related to conflict in South Asia. He is the author of Red Sun: Travels in Naxalite Country. He writes a column alternate Thursdays on conflicts that directly affect business.
Respond to this column at email@example.com