Vedanta Group's India Woes: Aluminum, Iron Ore Business Threatened

Continued from Part One.

Vedanta’s Aluminum Operation

Recently, India’s Environment Minister Jairam Ramesh cancelled the approval granted to the Odisha state-owned Orissa Mining Corporation (OMC) for mining bauxite from the Niyamgiri hills in that district, on the grounds that it would affect the environment and ultimately the large tribal population there.

VAL has often claimed that it had set up the refinery on an express assurance by the government that it would ultimately allow VAL to mine bauxite, a crucial raw material for aluminum, from a captive mine.

Now, VAL finds its plans going awry.

There’s also a case going on in India’s highest court, the Supreme Court of India. VAL has already served one notice to the government that it would have to shut the refinery by this December if it was not able to source bauxite from other parts.

Late last week, though, VAL advanced this deadline and said the plant may be shut down as early as this week because its efforts to procure bauxite form other states had come to nought.

Well, that happened late last Saturday when the plant was temporarily shut down due to bauxite shortages. If the plant shuts down permanently, thousands of employees may be rendered jobless because of the closure.

Vedanta’s Iron Ore Business and Mining Ban

Then of course there’s India’s mining ban.

Vedanta Resources’ iron ore extracting business, which contributes almost 15 percent to its total revenues, has almost ground to a halt because of the ban. The Group announced on Oct. 9 that its iron ore sales had fallen by a whopping 86 percent in the July-September quarter (Q2) this fiscal year, as production dipped due to the mining ban in the Karnataka state for over a year now.

The company said iron ore operations were affected by the mining ban not only in Karnataka, but also by a similar restriction in the tourist state of Goa. The company now hopes that it would be allowed to restart its Karnataka operations, in a mine with a production capacity of 2.29 million tons per year.

Vedanta would have been in a real jam had it not been for improved rates of production at its majority-owned venture Cairn India that helped lift its Q2 oil revenues.

Quarterly production at blocks developed by Cairn India in the desert state of Rajasthan went up by 37 percent year-on-year to 172,000 barrels a day, the company reported.

Vedanta’s copper business may also drop; more coming in Part Three.


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