Vedanta Update

Vedanta Update

12th June 2006

With the shuffling of the case against Vedanta Alumina in Orissa to the Ministry of Environment and Forests (MoEF) last February, the Supreme Court of India effectively pulled its own teeth. In September 2005 the Court's Central Empowered Committee (CEC) had unequivocally condemned the UK company's construction of its Lanjigarh alumina refinery, making it clear that mining of the adjacent bauxite-rich Nyamgiri hills was not acceptable. Instead of implementing these recommendations, the Court has referred the issues to the MoEF - which the CEC had itself identified as a culprit in the case.

(We end this update with the publication of a passionate critique of the Supreme Court's recent derelictions by a well-known civil liberties lawer who is also a member of the Court's committee on Judicial Accountability)

Since the CEC's report, Vedanta in London has been biding its time, no doubt hoping that the MoEF will rule in its favour on the refinery - if not the mine. Last week, in its provisional report for the last full year's operations, Vedanta executive chairman, Anil Agarwal admitted that the Lanjigarh plant won't come on stream in mid-June as originally hoped: the company says its trial run will probably start in August, with commercial output early next year.

The company has confirmed reports that the refinery has been importing ore from Madhya Pradesh and Chhattisgarh, and also from Gujarat. It has stockpiled over 40,000 tonnes of bauxite.

Agarwal's optimism (as expressed in Vedanta's 2005-2006 annual report) that the company will get access to bauxite from Nyamgiri now seems moderated. He claims the refinery can run at a profit even if it has to haul supplies in from outside Orissa or purchase what it can from existing mines within the state. That he has the practical capacity to do so may be doubted; that he has the money is indisputable.

According to Vedanta's provisional results for March 2005-2006, the group's revenue rose by 96.5% to $3,702 million, with an operating profit up nearly 200% (187.7%) to $944 million and current assets of $2.3 billion, with a debt gearing of under 1%. "We have already announced $3.1 billion of investments this year and Vedanta is very well positioned to realise further opportunities in India."

The company has just applied for SEZ (Special Economic Zone) status for its planned smelter, north east of Lanjigarh in Jharsaguda - a vital "third leg" of its integrated Orissa almininum project. If and when it comes on-stream the smelter will bring Vedanta's alumninum capacity to one million tonnes, ranking it (according to the company) among the ten top producers of the metal anywhere in the world. However, there is bound to be considerable opposition to the proposal: several public interest organisations in India allege that SEZs are primarily a cover for lax environmental standards, reduced worker protection, and a means of bypassing the requirements of a full public hearing.

Agarwal also seems to making progress in enlisting Orissa government support for locating his spectacular "Vedanta University" between the international tourist destinations of Puri and Konarak. The US$1 billion project is backed by a leading US consultancy with ties to the Pentagon and, according to information recently received by MAC, around 10% of places will be reserved for the sons and daughters of the wealthy and powerful within the state.

Growing condemnation

Agarwal and his associates are still trying to subdue the growing chorus of opposition to its Orissa ventures. Last month several thousand people demonstrated against the company at a meeting in the Lanjigarh district capital of Bhwanipatna. A week ago, 32 local people were arrested for carrying their opposition to the front gates of the refinery (most were released within 24 hours).

And - in a rare show of concern among UK media - two reporters from the London Sunday Times on June 4th reported accusations that the company may be linked to the unexplained deaths of three people in Lanjigarh, two of them vocal protestors against the refinery: an accusation the company has naturally denied.

Nor is Vedanta having it all its own way in the neighbouring state of Chhattisgarh. For two years Agarwal has been biting at the bit to secure the 49% of the integrated bauxite-aluminium producer, Balco, which it doesn't already own. (In fact, a 5% stake is technically reserved for Balco workers, as part of the privatisation agreement of 2001).

In 2004, the London-based minerals oligarch (Agarwal is the 28th richest man in the UK, according to the Sunday Times "Rich list" with a personal fortune of £1,680,000,000), thought he was well on the way to securing complete control of Balco. After all, P Chidambaram - a former director of Vedanta and personal friend - had just been appointed Finance Minister to the central Indian government.

Then came accusations that Balco had illegally evicted villagers from more than 1,000 acres of government land, to expand its Korba aluminium facilities and had ejected Indigenous familes on its Bodai-Daldali bauxite concession without observing their rights to adequate compensatory land..

In May this year independent government assessments of the true current value of Balco appeared to be glaringly at odds with Vedanta's offer. There were also accusations that previous estimates had been slanted in the company's favour by consultants formerly in Vedanta's employ.

So now, the Indian Attorney General has declared that he will oppose the sale.