Odisha may move court against Centre on Niyamgiri red flag

Environment ministry had recently rejected the project and put a question mark on Vedanta's Rs 50,000-cr alumina venture

The Naveen Patnaik-led Odisha government is set to approach the Supreme Court against the Centre for red-flagging the bauxite mining project of London-listed Vedanta Resources in the state’s Niyamgiri hills. The environment ministry had recently rejected the project and put a question mark on Vedanta’s Rs 50,000-crore alumina venture.

Since Petroleum Minister M Veerappa Moily took additional charge as the environment minister after Jayanthi Natarajan stepped down last month, environmental clearances have come in a bunch for mega projects, including that of South Korean steel major Posco in Odisha. But Niyamgiri has been an exception. Congress Vice-President Rahul Gandhi is believed to have a strong view against mining in that area.

“The Centre’s order is based on a referendum across 12 villages, as sought by the Supreme Court, to look into the religious aspects of the hills,” said a source close to the development. However, he argued that rejecting the project on the basis of that voting was illegal because bauxite was a scheduled mineral and came under the state’s ambit. “So, the state government is planning to approach the Supreme Court against the order and a response will also be filed before the environment ministry on the state’s behalf,” he pointed out.

MINING ROW

• Rs 50,000 cr: Vedanta’s planned investment at Jharsuguda (including alumina refinery, coal-fired power plant, 16-km rail link and other infra)
• OMC deal: After Vedanta failed to meet the bauxite demand, it struck a deal with Orissa Mining Corporation (OMC), which planned to mine at Niyamgiri Hills
• Referendum: On April 18 last year, the apex court asked the state govt for a referendum to look into the religious aspects of the hills (the 12 villages unanimously voted against mining in the hills)
• State’s word: Odisha CM Naveen Patnaik recently assured Vedanta Chairman Anil Aggarwal that his govt was committed to providing long-term bauxite security to Vedanta

The Anil Agarwal-led company had entered into an agreement with state-owned Orissa Mining Corporation (OMC) for supply of bauxite for its one-million-tonne-per-annum Lanjigarh alumina refinery in Kalahandi, after it failed to meet the full capacity due to scarcity bauxite, a raw material used for production of alumina. It was OMC that had planned to mine at Niyamgiri Hills, which hit hurdles after protests from environmental groups. Vedanta Aluminum’s investment in Lanjigarh for the entire unit, including aluminum smelter and captive power plant, is Rs 50,000 crore.

Meanwhile, on April 18 last year, the apex court had asked the state government for a referendum to look into the religious aspects of the hills. When a referendum was conducted, the 12 villages unanimously voted against mining in the hills.

Training guns on the Centre, Odisha Steel & Mines Minister Rajani Kant Singh said: “Vedanta had given a detailed presentation on alternative bauxite options. The government had formed an inter-ministerial panel headed by the finance minister to examine the possibility of supplying bauxite. For us, there are two options — prospecting new bauxite deposits and extracting bauxite from small laterite mines using new technologies.” The minister blamed the Centre for stalling the development of the bauxite-rich Kalahandi region.

Vedanta officials refused to comment on the development. “This is a case between the environment ministry and the Odisha government, we would not like to comment on this,” a senior Vedanta official told Business Standard.

 The development has been confirmed by an independent director who said the state agency would be left with no choice but to take legal recourse.

Analysts say the environment ministry’s red flag on mining bauxite atop Niyamgiri could upset Vedanta’s cost equation, push its alumina imports and cast doubts on the Lanjigarh refinery’s long-term sustainability.

“Had Vedanta got mining rights in Niyamgiri, its alumina production cost would have gone down by up to $130-140 a tonne. But rejection to the mining plan is a setback; it will step up the company’s dependence on alumina imports,” said Giriraj Daga, senior research analyst with Nirmal Bang, an institutional brokerage firm. On the other hand, environmental activists are demanding complete closure of Vedanta’s aluminium plant as well. Prafulla Samantara, one of the petitioners against the Vedanta project, said: “With the ministry rejecting mining plans at Niyamgiri, there is no logic of the existance of Vedanta’s plant in the region. We want complete exit of the company from the region.”

Vedanta’s applications for alternative bauxite mines have been stuck at the government level. The steel & mines department had written to the Centre seeking reservation of the Karlapat bauxite mine, which has deposits of 207 million tonnes, for OMC. The reservation promised to rescue Vedanta’s refinery.

Recently, chief minister Naveen Patnaik had assured Vedanta Resources Chairman Anil Agarwal and L&T Chairman A M Naik that his government remained committed to providing long-term bauxite security to Vedanta and would look into L&T’s mines and other bauxite resources positively.

The government had also assured Vedanta that it would take all steps to ensure mining lease could be granted over the next two months for small and laterite mines, which could serve as short-term breather for its refinery.

The state government was allegedly going slow over the grant of mining lease (ML) to global engineering giant L&T that had won prospecting license (PL) over the Sijimali and Kutrumali mines in south Odisha's Rayagada and Kalahandi districts with reserves of close to 300 million tonne. This is despite a legal opinion in favour of L&T by the government's Supreme Court counsel Uday U Lalit on July 24 this year.