India Blocks Vedanta Odisha Mining Plan After Villagers Oppose

India has blocked Vedanta Resources Plc (VED) from mining in a hill range that holds bauxite earmarked for an $8.1 billion aluminum complex in Odisha state following objections by local tribes.

“We rejected it after the local panchayats rejected,” Environment Minister Veerappa Moily said in New Delhi today, referring to village-level governance bodies. “That’s what we’re doing for most projects,” Moily said, adding he has recently permitted some worth 1.5 trillion rupees ($24.4 billion).

The Environment Ministry’s decision adds to billionaire Anil Agarwal’s troubles in India’s metals industry. London-listed Vedanta has 1.25 million metric tons of new aluminum refining capacity lying idle because of a lack of bauxite.

“This is the end of the Niyamgiri project,” Goutam Chakraborty, a Mumbai-based research analyst at Emkay Global Financial Services Ltd. (EMKAY), said by phone. “Even if Vedanta looks at new mines for sourcing bauxite, it will take them at least 4 to 5 years.”

Pavan Kaushik, a spokesman at Vedanta Resources, didn’t respond to two calls on his mobile phone seeking comment.

All 12 villages in the Niyamgiri area in the eastern state inhabited by the Dongaria and Kutia tribes believe their god lives in the Niyamgiri hills and have rejected the incentives offered in exchange for mining approval.

The Niyamgiri villagers were asked to decide the fate of the project on April 18 by the nation’s top court. The judges intervened in the case after Vedanta’s partner, Orissa Mining Corp., contested the Environment Ministry’s August 2010 finding that granting a mining permit would damage the environment and displace the tribes and wildlife in the area.

Tribal right over land is recognized and the local authority of the tribes must clear the proposal, a three-judge panel headed by Aftab Alam of the Supreme Court said in its April 18 ruling.

Vedanta, which has invested 500 billion rupees ($8.1 billion) to build a smelter, refinery and power plant near Niyamgiri, currently operates a 1 million-ton refinery, a 500,000 ton smelter unit and a power unit.

The refinery, which stopped output following a bauxite shortage, restarted in July after raw-material availability improved.

To contact the reporters on this story: Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net; Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net

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