India blocks massive expansion of Vedanta refinery

21st October 2010, Comments 0 comments

India on Thursday denied Vedanta Resources permission for a six-fold expansion of its aluminium refinery in Orissa state over environmental concerns, dealing a fresh blow to the British company.

The latest setback comes as Vedanta battles to win Indian government approval of its planned 9.6-billion-dollar acquisition of a controlling stake in Cairn India, a unit of Edinburgh-based Cairn Energy.

Two months ago the environment ministry also rejected Vedanta's plans to mine bauxite on land held sacred by tribes people to supply the refinery.

The ministry said Thursday that Vedanta, controlled by Indian-born billionaire Anil Agarwal, must "maintain the status quo" at the Lanjigarh plant in Orissa.

Vedanta was planning an 8.5-billion-dollar expansion to boost output to six million tonnes a year from one million but the move was fiercely opposed by locals who said it would wreck the area's fragile eco-system.

The announcement was the latest sign of a tougher approach by the environment ministry to improving India's green track record as concerns mount about the impact of industrialisation on air quality and wildlife.

Vedanta said it had no immediate reaction to the decision but in the past the company has insisted it has scrupulously followed India's environmental regulations in setting up and operating the refinery.

"Vedanta is learning the hard way it cannot ride roughshod over tribal peoples forever. Other companies should learn from Vedanta's mistakes," said Stephen Corry, director of London-based rights group Survival.

The ministry did not carry through with a threat to scrap overall approval for the refinery in light of alleged violation of environment standards.

It said Vedanta could continue to run the refinery as long as the company maintained a forested area around the plant and kept pollution in check.

Vedanta, whose goal of being a major global commodities player rests on development of its Indian assets, has suffered a series of setbacks in the country.

Last month, an Indian court ordered Vedanta subsidiary, Sterlite Industries, to close its huge copper smelter in southern Tamil Nadu state over "unabated air and water pollution".

Sterlite, which appealed against the order to India's Supreme Court, has won a reprieve to run the facility until at least December.

Vedanta is also encountering mounting difficulties in concluding its proposed deal to buy up to 60 percent of Cairn India.

On Thursday, state-run Oil and Natural Gas Corp (ONGC), Cairn India's exploration partner, insisted that Cairn Energy needs its consent along with that of the government to sell the stake.

ONGC said in a statement it had asked Cairn Energy to supply details of Vedanta's "financial strength, technical capability and past experience in the field of oil and gas" to decide on what step to take.

© 2010 AFP

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