Bauxite Shortage Hits Vedanta Aluminium - Metalworld.co.in

Bauxite ShortageHits Vedanta AluminiumThe UnderstandingIn October 2004, the state governmenthad signed a memorandum ofunderstanding (MoU) with Vedanta forsetting up an integrated alumina andaluminium complex along with anassociated captive power plant inOrissa. This MoU also includedsupplying 150 million tonne of bauxitefor Vedanta's alumina refinery atLanjigarh. Towards this end, thegovernment of Orissa identifiedNiyamgiri mine as the initial source ofbauxite supply to the extent of 78million tonne. OMC, which holds thelease of Niyamgiri mines, applied for allapprovals to commence mining fromNiyamgiri. The Supreme Court haddirected the Union government to grantthe mining approval in August 2008.Until August 2010, Vedanta hadinvested around ` 4,000 crore in itsaluminium projects in Orissa. Around10,000 people are employed at theLanjigarh alumina refinery plant.Vedanta is currently operating itsalumina refinery by outsourcingbauxite and wants the stategovernment to provide an alternativesupply of bauxite. The Union ministryf o r e n v i r o n m e n t & f o r e s t sunfortunately scrapped Orissa MiningCorporation's (OMC) bauxite miningproposal in the Niyamgiri hills in thebackward Kalahandi district of Orissa.The ProblemThe factory was established inbauxite- rich Koraput district becauseof its abundance of bauxite reservesavailable in Odisha. The company wasoperating a 1 mtpa capacity refineryplant at Lanjigarh since August 2007and requires at least 10,000 tonne ofbauxite daily. Though the stategovernment committed to provide 150million tonne of bauxite for VAL plant,not a gram was given to it during thelast five years. Consequently, thecompany ran its refinery by arrangingbauxite from Jharkhand, Chhattisgarh,Madhya Pradesh, Gujarat and AndhraPradesh. But, now it is not possible toget more raw material from otherstates, said the company ChiefOperating Officer Mukesh Kumar.Though the company applied for 26

In-Focusbauxite reserves in the state, nothingwas finalized due to different reasons.So far the company has invested `9,000crore in the project which providedemployment to 7,000 people includingdirect jobs to 3,000. The company wasset up based on assurance from thestate government to provide 800million tonnes of bauxite from localreserves. While the supply fromJharkhand and Andhra Pradesh hasbeen hit due to regulatory hurdles, thedemand in the export market has madesourcing from Gujarat difficult for VAL.Since the Gujarat Mineral DevelopmentCorporation has not floated tender forsale of bauxite in the recent past, VALwas unable to get the raw material fromthere.Alumina is the intermediate productto produce aluminium. Three tonnes ofbauxite is required to produce onetonne of alumina and half a tonne ofaluminium can be extracted from onetonne of alumina. At about 1.7 billiontonnes, Odisha has nearly two-third ofIndia's total bauxite reserves. They areconsidered to be of high grade due toits low silica content. To run thealumina refinery, VAL has a 25-yearlong offtake agreement with OdishaMining Corporation (OMC) for annualsupply of 3 million tonnes of bauxite.The raw material was supposed to besupplied from mines at the NiyamgiriHills in the state, where the SupremeCourt cleared mining in 2008.However, the supply problem hascontinued for the company as mining atthe Niyamgiri Hills was subject toapproval from the EnvironmentMinistry, which has not yet given its goahead. Sourcing of bauxite from otherstates has increased the landedlogistics cost for VAL to about ` 2,300per tonne, thereby increasing thealumina production cost to about morethan ` 19,000 per tonne.CriticismVedanta has been criticized byhuman rights and activist groups,including Survival International andAmnesty International and NiyamgiriSurakshya Samiti due to theiroperations in Niyamgiri Hills in Orissa,India that are said to threaten the livesof the Dongria Kondh that populate thisregion. The Niyamgiri hills are alsoclaimed to be an important wildlifehabitat in Eastern Ghats of India as pera report by the Wildlife Institute ofIndia as well as independentreports/studies carried out by civilsociety groups. In January 2009,thousands of locals formed a humanchain around the hill in protest at theplans to start bauxite mining in thearea. The Union Environment Ministryin August 2010 rejected earlierclearances granted to a joint ventureled by the Vedanta Group companySterlite Industries for mining bauxitefrom Niyamgiri hills. Vedanta'sAlumina Refinery in Lanjigarh wascritiqued by the Orissa State PollutionControl Board (the statutoryenvironmental regulation body) for airpollution and water pollution in thea r e a . A c c o r d i n g t o A m n e s t yInternational, local people reporteddust from the plant settling on clothes,crops and food. Vedanta officialsclaimed there was no dust pollutionfrom the plant at all. An environmentalinspection of the plant reported waterpollution by the plant includingincreasing the pH value of the riverVamshadhara below the refinery and ahigh level of SPM in the stackemissions. In October 2009 it wasreported that the British Governmenthas criticized Vedanta for its treatmentof the Dongria Kondh tribe in Orissa,India. The company refused to cooperatewith the British Governmentand with an OECD investigation. Theyh a v e r e j e c t e d c h a r g e s o fenvironmental damage, saying it maybe related to the increased use offertilizer by farmers.LitigationsIn early 2007, the Armeniangovernment began an investigation ofAGRC, a subsidiary of VedantaResources, vis-à-vis compliance withlicensing and tax regulations followingindependent media claims that AGRCsubmitted incorrect data in productionreports relating to royalty paymentsand was in violation of licensing laws.AGRC was also served a preliminarynotice of penalties and fines to the tuneof about $50 million (or 80 per cent ofits net assets).In respect of bauxite mines atLanjigarh, Orissa, public interestlitigations were filed in 2004 by Indiannon-government organisations led bythe Peoples Union for Civil Liberties tothe Supreme Court sub-committeeregarding the potential environmentalimpact of the mines. The Ministry ofEnvironment and Forests receivedreports from expert organisations andhas submitted its recommendations tothe Supreme Court. The subcommitteehas found "blatantv i o l a t i o n s " o f e n v i r o n m e n t a lregulations and grave concerns aboutthe impact of the Niyamgiri mine onboth the environment and the localtribal population. The committeerecommended to the Court that miningin such an ecologically sensitive areashould not be permitted. Vedantachairman Anil Agarwal rejectedallegations of maltreatment of locals.Agarwal said that the mining project atNiyamgiri has been approved by theIndian Supreme Court based on aprocess that included consultation withthe locals carried out within the boundsof the law, attesting that the majority ofthe locals supported their industrialefforts. An anonymous official ofVedanta Resources blamed the NGO'sattacking Vedanta of being funded byc o m p e t i n g f o r e i g n m i n i n gcorporations.In February 2010, the Church ofEngland decided to disinvest from thecompany on ethical grounds. Accordingto indigenous rights organization,Survival International, the Church'sdecision is extremely unusual, as italmost always prefers a policy of' c o n s t r u c t i v e e n g a g e m e n t ' t o68January 2013

Dateline1997March 2003September 2004September 2005February 2006March 2007August 2007April 2009April 2009August 2010March 2011September 6, 2012December 5, 2012disinvesting. The Church stated that"we are not satisfied that Vedanta hasshown, or is likely in future to show, thelevel of respect for human rights andlocal communities that we expect" andthat "[it] would be inconsistent with theChurch investing bodies' joint ethicalinvestment policy". The Director ofSurvival International, Stephen Corry,said, "The Church's unprecedented andvery welcome decision sends a strongsignal to companies that trample ontribal peoples' rights: we will notbankroll your abuses. Anybody that hasshares in Vedanta should sell themtoday if they care about human rights."Vedanta responded by expressingdisappointment at the Church's actionsand that they are "fully committed topursuing its investments in aresponsible manner, respecting theenvironment and human rights".The NGO Amnesty InternationalACTIONS IN LINEActionAnil Agarwal-owned Sterlite Industries signs MoU withOdisha govt for bauxite mining plan during NiyamgiriSterlite relates to MoEF for environmental clearway for adue refinery during LanjigarhMoEF grants a refinery environmental clearway oncondition that Sterlite got mining clearway beforeoperationalisation of a refineryThe Central empowered cabinet (CEC) recommends thatmining should not be accessible in a Niyamgiri HillsThe Supreme Court refers a matter to MoEF's ForestAdvisory Committee (FAC) — that looks into diversion oftimberland land for non-forest functions — and asks for anews in 3 monthsCEC reiterates amount that MoEF had acted irresponsiblyand with undue promptness in extenuation clearances toVedantaVedanta Aluminium commissions 1 mtpa refineryPublic conference hold for six-fold enlargement ofVedanta refineryMoEF clears Niyamgiri mining projectMoEF bits Stage-II timberland clearway for Niyamgiri leaseOdisha Mining Corporation (OMC) moves Supreme Courtopposite MoEFVedanta Aluminium serves three-month closure notice toOdisha govt to tighten refinery by Dec 5Vedanta Aluminium shuts down Lanjigarh refinery and75-MW serf energy plant trustworthy to ithas also come to criticize thecompany's record on human rights.Following this controversy, severalshareholders have joined in sellingtheir shares due to human rightsconcerns. This includes the JosephRowntree Charitable Trust, theMarlborough Ethical Fund, MillfieldHouse Foundation and PGGM. TheBritish and Norwegian governmentshave both condemned the project, andMartin Currie Investments has alsodisinvested following pressure fromSurvival. The BP Pension Fund hasreduced its shareholding over similarconcerns. On July 2010, the ChiefSecretary of Orissa has ordered a newinvestigation into the rights of theDongria Kondh tribe affected byVedanta Resources bauxite mine, inw h a t S u r v i v a l I n t e r n a t i o n a lcharacterized as a "third major blow toV e d a n t a i n a m o n t h " . T h eannouncement came two weeks afterthe Minister of Environment andForests ordered an investigation on thes a m e t o p i c . A g o v e r n m e n tinvestigation published in Marchconcluded that Vedanta's mine 'maylead to the destruction of the DongriaKondh'. A four-member panel set up byGovernment of India in the Ministry ofEnvironment and Forests investigatedthe bauxite mining proposal overNiyamgiri near Lanjigarh in thedistricts of Kalahandi and Rayagada inOrissa. The area has been traditionalhabitat of two particularly vulnerabletribal groups, the Dongria Kondh andthe Kutia Kondh. The Committeesubmitted their report on 16 August2010, stating "The Vedanta Companyhas consistently violated the ForestConservation Act [FCA], the ForestRights Act [FRA], the EnvironmentProtection Act [EPA] and the OrissaForest Act in active collusion with theState officials. ..Allowing mining ... bydepriving two primitive tribal groups oftheir rights over the proposed miningsite to benefit a private company wouldshake the faith of the tribal people inthe laws of the land". Based on a panelreport, the Government of India hasserved a show cause notice on theGroup on why their Stage Ienvironment clearance should not becancelled.ClosureFinally, the project was announcedfor closure since December 5, 2012.The mining conglomerate, which runsthe alumina refinery through anunlisted subsidiary, VAL, had given aclosure notice to the state governmentthree months back citing severeshortage of bauxite as the primaryreason for the shutdown.The company, in a allege closurenotice to a government, had voiced agoal to tighten a refinery temporarilyfrom Dec 5, citing non-availability ofbauxite. It had urged a supervision toarrange choice sources of bauxite(other than an argumentative Niyamgirideposit) for a reconstruction of a unit.More than dual years ago, VedantaAluminium had sought bauxite havenfrom 7 choice mines, 5 in Rayagada anddual in Kalahandi, after a Union methodof surroundings forests had scrapped astage-II timberland clearway forNiyamgiri franchise in August, 2010.

Bauxite Shortage Hits Vedanta Aluminium - Metalworld.co.in

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