BILLIONAIRE’S EXPANSION DREAMS IN DOUBT AFTER INDIA DEATHS
INDIAN billionaire Anil Agarwal often talks about his dream to turn his London-listed company Vedanta Resources into a global resources giant. He has already bought stakes in big mining companies, such as Anglo American Plc, and says he plans to spend at least $1 billion on investments in Africa.
But in his home country, where he rose from a scrap dealer to a metals magnate, court-imposed fines, costly plant and mine shutdowns, and public protests against his businesses for allegedly polluting the environment, have held back his lofty ambitions and hurt the company’s valuation, according to some bankers and analysts.
On Monday (29), a south Indian state ordered the permanent closure of Vedanta Resources’ copper smelter after 13 people protesting to demand its shutdown on environmental concerns were killed last week.
“We have taken a permanent decision to shut down the plant and issued government orders to do the same,” Edappadi K Palaniswami, chief minister of Tamil Nadu state said after meeting officials, including from the pollution department.
The district’s main administrative officer, called the collector, supervised the sealing as the crowd whistled and cheered from behind police barricades placed 50 metres away from the entrance.
The plant, in the coastal city of Thoothukudi, was shut since March for maintenance and pending a renewal of its licence, even as residents continued largely peaceful protests demanding it be shut for good.
Matters turned particularly ugly last Tuesday (22) when police opened fire on protesters seeking to shut down the copper smelter, killing 10. Two more people died the next day, and the Tamil Nadu state government transferred senior police and administrative officials from the city.
Vedanta called the closure of the plant it has operated for over 22 years an “unfortunate development”. “We will study the order and decide on the future course of action,” the company said.
Last week Tamil Nadu’s high court also ruled against a request to double the factory’s annual production of 400,000 metric tonnes, which would have made it one of the biggest copper smelters in the world.
Analysts say copper contributes around eight per cent to the consolidated operating profit of the company. “We’re not in that stage to look at setting up a plant elsewhere,” P Ramnath, chief executive of Vedanta’s India copper business, had said last week.
“We’re confident that we will be able to overcome these issues. It will certainly require a huge effort but I am sure we can hope to restart as quickly as possible.”
Ramnath added that the smelter suffered from a “perception” that it was the most polluting industry in Thoothukudi because of its size, and that support of the local community would be important to restart the plant and double its capacity, as suggested by Agarwal.
“Our chairman has said we need the licence to operate, but also we need to build bridges with the local community so we get their licence to operate as well,” he said. “But at this point of time the atmosphere is very tense, temperatures are high.”
Agarwal, who holds a 71.4 per cent stake in Vedanta, told the Financial Times in an interview last week that he plans to step back from running the company.
Agarwal said on Twitter earlier last month that his company was the victim of a foreign conspiracy aimed at keeping India reliant on imports. He did not name any specific countries or companies.
“Certain vested interests will prefer India to remain import dependent and use our country as their market, making India spend hard-earned foreign exchange and lose millions of jobs,” he said, in reference to a court-ordered stoppage of iron ore mining in Goa state, the campaign against the Thoothukudi copper plant and a shortage of bauxite for an aluminium smelter.
The Tamil Nadu Pollution Control Board cut the power to the smelter last Thursday (24), saying that last week it found the company preparing to resume production without permission.
Ramnath denied the allegation. “There was no reason for making preparations to restart the plant when we are still under maintenance that happens once in four years,” he said.
Around 250,000 tonnes of the smelter’s output is consumed locally, making up for 36 per cent of India’s demand. The rest is exported to countries such as China.
Vedanta wanted to double the smelter’s capacity mainly to meet India’s rising copper demand, which Ramnath expects to grow by up to 10 per cent annually. The expansion would, however, be delayed from its earlier completion target of late 2019.
Several cases have been filed against the plant since it started in 1996, and India’s top court in 2013 fined it about $18 million for breaking environmental laws.
The next year, Vedanta lost a battle to mine bauxite in the lushly forested area, Niyamgiri hills in Odisha state, that the Dongria Kondh tribe there considers sacred.
The rejection forced the company to not only import expensive bauxite for an aluminium plant in the same state but to also delay its expansion. Vedanta said it had evacuated about 3,500 employees from the plant site due to the tensions. (Reuters)
