Vedanta Resources' Projects in India Face Setback Due to Environmental Clearances

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Researched by Industrial Info Resources (Sugar Land, Texas)--Several projects proposed by Vedanta Resources plc (LSE:VED) (London, England) in India may be delayed due to environmental clearance issues. In a recent development, the Madras High Court (Chennai, Tamil Nadu) directed Sterlite Industries India Limited (BSE:500900) (Tuticorin, Tamil Nadu), a subsidiary of Vedanta Resources, to stop operations at its 400,000-ton-per-year copper-smelting facility at Tuticorin in Tamil Nadu, as its operations were adversely impacting workers at the site and were posing an environmental threat. Sterlite Industries allegedly operated the smelter without implementing the Environmental Impact Assessment (EIA) and holding a public hearing.

The company was planning to double the capacity of the smelter and build a 160-MW captive power-generating facility with an investment of $514.5 million. The power plant was expected to be commissioned by mid-2011. The smelter, which is considered to be the ninth-largest smelting facility in the world, produced 334,202 tons of copper up to March 2010.

Earlier, Sterlite Energy Limited (SEL) (Mumbai) was forced to close its 600-MW independent thermal power plant at Jharsuguda in Orissa after residents complained about air pollution caused by the power project. The power plant, which was commissioned on August 21, 2010, faced technical complications leading to fly-ash emissions. The project, which has been connected to the state grid, is at the same site as SEL's 1,215-MW captive power project. According to recent reports, the power project has resumed operations after corrective measures were taken to eliminate fly-ash emissions.

However, Vedanta Resources' woes are far from over. The National Environment Appellate Authority (NEAA) (New Delhi) rejected the approval granted to the $1.7 billion bauxite mining project proposed by Sterlite Industries and has directed the Ministry of Environment and Forests (MoEF) to reassess the proposal. According to NEAA officials, the EIA study, which is a critical document for approval from the ministry, was not made available during the public hearing. Further, the authority expressed concern about the nature of the EIA, which did not analyze and take into consideration the adverse implications of the mining project on human life. According to Jairam Ramesh, the minister of Environment and Forests, Sterlite Industries had flouted several laws, including the Forest Conservation Act, the Forest Rights Act and the Environment Protection Act. The project is also likely to endanger the life of the Dongria Kondh tribal community in the region. On its part, Sterlite Industries has refuted the allegations and claimed that it had not flouted any stipulated norms. The ministry also has issued a notice to the company for illegal capacity augmentation of its alumina refinery at Lanjigarh in Orissa to 6 million tons per year, from 1 million tons per year.

However, the good news is that SEL's power projects are on track. The 1,980-MW supercritical power project at Talwandi Saboo in Punjab is expected to be completed by 2014. The company's proposed 2,400-MW coal power project at Jharsuguda is likely to begin commercial operations by the end of 2011.

The MoEF is taking a tough stand on granting clearances for mining projects. In a related development, Power Finance Corporation Limited (BSE:532810) (PFC) (New Delhi), which is India's nodal agency for development of ultra-mega-power plants (UMPP), is facing hurdles in receiving coal-block allocation clearances for its 4,000-MW Bedabahal UMPP in Orissa. The delay has forced PFC to move the date for receiving bids from September 2010 to November 2010. The Bedabahal UMPP is the second project after Sarguja UMPP to face delays due to clearances from the ministry.

Recently, the ministry stood firm on its stand that mining companies will not be granted access in "no go" areas in the country. However, the government decided to make an exception to some projects that already have received coal block allocation in the "no go" areas. The Dulanga coal block allotted to NTPC Limited (BSE:532555) (New Delhi) is in this region. Details on the projects will be released shortly. Earlier, a coal block allotted to Adani Power Limited (BSE:533096) (Ahmedabad, Gujarat), which was proposing to develop the 3,300-MW Tiroda power project, was cancelled. The ministry refused allocation as the mine was close to the Tadoba-Andheri Tiger reserve.

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