India rejects Vedanta bauxite mining project

NEW DELHI — India’s environment ministry today refused Vedanta Resources permission to mine bauxite for its alumina refinery in eastern India, citing violations of environmental and human rights laws, and said it is considering legal action against the London-based mining giant.

Vedanta shares were down 7.1 percent in afternoon trade on the London Stock Exchange after the announcement.

The rejection by the increasingly assertive ministry comes amid growing doubts among many Indians — both in the government and outside it — about the human and environmental costs of India’s rapid economic growth.

“There has been a very serious violation of laws,” Environment Minister Jairam Ramesh told reporters. “Therefore, the project cannot go ahead.”

India is struggling to industrialize without alienating tens of millions of small farmers and tribal people. The raw materials needed to fuel India’s booming economy — bauxite, coal and iron ore — are concentrated in an impoverished swath of eastern India that has benefited little from industrial progress.

This area, which stretches from the state of Bihar down to Andhra Pradesh, is also the heartland of a worsening Maoist insurgency, which has been aggravated by forced land acquisitions and rampant environmental abuses.

The violence — with over 800 killed so far this year — has put at risk at least $84.3 billion worth of power plants, mines, steel factories and refineries, according to Anirudha Dutta, an analyst with brokerage and investment group CLSA.

Now the environment ministry is taking a leading role in the fight against corporate abuses.

In addition to taking on Vedanta, this month the environment ministry ordered a halt to all work on South Korean steel giant Posco’s planned $12 billion steel plant in the state of Orissa because the government failed to take into account the rights of tribal people. It also said Jindal Power — a politically powerful Indian conglomerate — should stop constructing a power plant twice the approved size in the state of Chhattisgarh.

The ministry also said in its report that it has taken steps to revoke environmental clearances already granted for Vedanta’s alumina refinery in Orissa, which the company set up in 2008 hoping it would be allowed to extract bauxite from the surrounding Niyamgiri hills.

That could prove damaging for Vedanta, which is also fighting to get government approval to acquire a majority stake of Cairn Energy Plc’s Indian oil and gas assets for up to $9.6 billion. Local media reports suggest that the government wants to give state-owned oil and gas companies a chance to counter the bid.

Vedanta issued a statement Tuesday, saying it has not violated any regulations at its refinery, which employs about 10,000 people, and pledged not to start mining until it obtains required approvals.

Mukesh Kumar, the chief operating officer of Vedanta Aluminum, told CNBC-TV18 that the company will stick with plans to expand its refinery six-fold and expressed confidence that the state government of Orissa, which is contractually obliged to provide the refinery 150 million metric tons (165 million tons) of bauxite a year, will soon find another source.

“We are very hopeful they will start considering some other bauxite deposits,” Kumar said. “I don’t think there will be any problem.”

Vedanta says Orissa’s bauxite reserves are the fourth-largest in the world, but no new alumina refinery has been set up in the region in 25 years. Bauxite is used for producing alumina — a material used to make aluminum.

“India needs aluminum production,” Kumar said. “Without this India cannot survive.” He called the regulatory hurdles “a temporary phenomenon.”

Vedanta has invested $9.5 billion in Orissa.

The decisions follow a scathing report by an environment ministry committee, which said the mine would “threaten the survival” of thousands of tribal people.

The committee said the existing refinery is illegally occupying 26 hectares (64 acres) of forest land, showing “total contempt for the law” and that 11 of the 14 bauxite mines that now supply the refinery from nearby states like Jharkhand don’t have legally mandated environmental clearances.

The ministry also says Vedanta and state officials falsified information, failed to obtain required consent from locals for the mine, and illegally completed 60 percent of a six-fold expansion of the refinery, which had an initial capacity of 1 million metric tons (1.1 million tons) a year, without environmental clearance.

India’s Supreme Court gave a greenlight for the mine in 2008, but Vedanta has drawn vocal criticism from rights groups and socially conscious investors concerned about the plight of tribal people, who live off the forest and consider the mining site sacred.

“We welcome the decision,” Amnesty International’s deputy director for the Asia-Pacific Ramesh Gopalakrishnan said today. “The same mistakes and abuses should not be repeated if the project is shifted to a new site.”

He called the ministry’s decision a “first step” in redressing India’s long history of corporate abuses, but said many violations persist.

“This demonstrates that there are laws in India which, if they are enforced and strictly followed, abuses can be controlled,” he said. “Whether they have the political will to do so in other cases, that we’ll have to see.”