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Agarwal’s Sesa Plans to Lay Off 40% of Goa Employees

Sesa Sterlite Ltd., India’s biggest iron-ore exporter until a ban halted its mines in Goa 18 months ago, plans to lay off 40 percent of its workforce in the state to cope with spiraling costs and negligible business.

The Vedanta Resources Plc unit, controlled by billionaire Anil Agarwal, is proposing to let go 1,000 of its 2,500 workers, said Prasun Kumar Mukherjee, executive director for its iron-ore business. Sesa will seek to overturn a labor ministry order last month restraining the company from cutting the jobs, he said.

“We’re looking critically at all fixed costs,” Mukherjee said in an interview at Sesa’s Goa headquarters. “So far we haven’t cut a single penny from staff salaries, but now we have to take this difficult decision.” The workers will get half of their salaries after being laid off, he said.

The Goa government, acting on the counsel of a panel set up by the mines ministry to probe mining violations, imposed the ban in September 2012. The next month, India’s top court upheld the ban and even halted transportation of ore, similar to its sanction in Karnataka the previous year.

The two adjoining states at that time produced almost half of India’s output of the steelmaking material as demand soared amid China’s economic boom. Goa, which accounted for about half of India’s iron-ore exports, lost an estimated 349.4 billion rupees ($5.8 billion) because of illegal mining, the panel, headed by retired judge M.V. Shah, said in a report at the time.

‘No Brakes’

Illegal mining in the state was the result of a surge in global prices and like “a vehicle without brakes running down a slope,” Goa Chief Minister Manohar Parrikar said last month. Still, the estimated loss was exaggerated and a realistic figure “could be about 10 percent of the estimates,” he said.

Sesa Sterlite shares fell 3.3 percent to 177.80 rupees at the close in Mumbai today. The stock has declined 12 percent this year, compared with a 3.1 percent gain in the benchmark S&P BSE Sensex.

London-listed Vedanta named former Rio Tinto Group Chief Executive Officer Tom Albanese as CEO on March 6.

A separate panel appointed by the Supreme Court to set a limit on the production of ore in Goa is expected to submit its report by March 15. The court, which in November allowed sales of about 15 million metric tons of ore that had already been excavated, will decide on the ban after reading the report.

Reserve Cash

The prolonged shutdown of mines in Goa and Karnataka, where Sesa also owns quarries, has left the company’s iron-ore unit without revenue, forcing it to use reserve cash to pay salaries and other costs.

The company, which had 4,000 workers before the ban, has removed 1,000 temporary staff and cut 50 managerial jobs, Mukherjee said. Not a single engineer has been hired in two years and most foreign travel has been halted, he said.

The measures are saving as much as 50 million rupees a month, Mukherjee said. That supplements the dividend income from Sesa’s holding in Cairn India Ltd., operator of the nation’s biggest onshore oil deposit, he said. Vedanta acquired Cairn India for $8.67 billion in 2011.

Meanwhile, Sesa workers have not only lost the scope for working extra shifts, their performance bonuses have also been deferred.

“We expect companies to show empathy for their workers,” said Christopher Fonseca, general secretary of the All India Trade Union Congress, which had challenged Sesa’s lay-off notice before the federal labor secretary. “They have nothing to fall back on.”

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