Is Vedanta’s Sterlite Copper plant in Tamil Nadu set for reopening?

India Today, February 22, 2023

Nearly five years after the Tamil Nadu government had sealed the Vedanta group’s Sterlite Copper smelting plant in Thoothukudi, prospects of its reopening have brightened. After reports suggested that Vedanta had shelved plans to sell the plant, full-page newspaper advertisements have appeared in the state since February 17 to advocate the reopening.

‘Give back our livelihoods’, screams the advertisement and points out that the copper smelting plant had provided livelihood to scores of people in Thoothukudi for 22 years until the state government shut it in May 2018. It also listed various reasons favouring reopening of the plant, but stopped short of saying that was indeed being done.

The appeal to give livelihoods back cited that hundreds of thousands of people were jobless and suffering, that the National Green Tribunal (NGT) had affirmed the copper factory’s environmental practices, that Sterlite Copper had produced medical oxygen to help during the Covid pandemic, and that the project had spawned opportunities for the growth of many small businesses. Further, the ad stated that the government had also suffered huge revenue loss due to the closure. “We have fallen prey to Chinese economic terrorism, which has led to economic downfall. But there has been no fall but a rise in pollution levels at the four monitoring stations in the Sterlite Copper neighbourhood after its closure,” Manickam Athapa Gounder, industrialist and founder president, Manu Neethi Foundation, one of the entities that has endorsed the advertisement.

The shutdown in 2018 had followed massive public outrage over violence that broke out on the 100th day of the anti-Sterlite protests over alleged environmental degradation caused by the plant. Fourteen agitators were killed in police firing. The families of the deceased are awaiting justice. Opinion is, therefore, sharply divided on the reopening of the copper plant. On one side are those who want it to be up and running again and on the other those who oppose it fiercely by citing the plight of families killed in the police firing.

Last September, under the banner of the Pro-Sterlite Plant Federation, protesters presented a memorandum to central government authorities and agencies, pointing out how their livelihoods had been impacted severely. The memorandum emphasised that the closure was due to an “orchestrated agitation by outsiders”.

The Justice Aruna Jagadeesan Commission of Inquiry, which probed the police firing and subsequent rioting in Thoothukudi, had recommended that the Tamil Nadu government take strict action against the police and state administration for mishandling the situation back in 2018. But the Dravida Munnetra Kazhagam (DMK) government has not acted on the recommendations. Over the years, several petitions have been submitted to TN chief ministers and government offices for reopening of the plant, which was a significant employment generator in the region before its closure.

After stopping the process to sell the Sterlite copper plant, Vedanta has stepped up efforts to work with the local population to restart the plant, whose capacity of 400,000 tonnes a year accounted for almost 40 per cent of the copper production in the country. The Supreme Court is, meanwhile, hearing Vedanta’s petition to nullify the Tamil Nadu government order to close the plant.

Restarting the plant will increase India’s copper output and cut imports. Analysts argue that India can ill-afford closing this plant permanently when the demand for copper is at its peak in the country. India had turned a net importer of the metal for the first time in almost two decades following the plant’s closure. Post closure, the country’s copper exports plunged by 90 per cent within three years.

Between 2013-14 and 2017-18, the domestic production of refined copper grew at a compound annual growth rate (CAGR) of 9.6 per cent. But with the closure of the Sterlite plant, the output fell by 46 per cent at the end of the fiscal year 2019. From a net exporter of 335,000 tonnes in 2017-18, India became a net importer of copper, first in 2018-19, and the trend remains unaltered till 2021-22. During the April-October period of the current fiscal, India’s import at 88,000 tonnes was higher than exports of 16,000 tonnes.

By one estimate, India now imports $2 billion (about Rs 16,575 crore) worth of copper every year and bears an export loss of over $1.5 billion (about Rs 12,430 crore), resulting in overall losses of about Rs 20,000 crore to the economy. Going by the current usage and forthcoming projections, copper demand will double between now and 2035. The world’s usage of refined copper has nearly doubled in the last 50 years to stand at 25.3 million tonnes (MT) in 2021. Standard and Poor Global estimates that by 2050, the demand for copper will go up to 53 MT, more than the amount of copper the world has consumed between 1900 and future.

Not only this, given the widespread application of copper and its byproducts in diverse industries, the plant’s shutdown has crippled several small and large-scale enterprises, creating a massive demand-supply gap. Sterlite was the only domestic supplier of phosphoric acid in the country, the raw material required for fertilisers. Besides, the Thoothukudi plant was also the largest supplier in Tamil Nadu of sulphuric acid, a chemical used in detergent and chemical industries.

The plant was the only indigenous phosphoric acid provider and the critical slag and gypsum supplier to nearly 20 cement companies. The downstream players depended on the plant to procure five raw materials: gypsum, sulphuric acid, phosphoric acid, copper cathode and copper rod. After the plant’s closure, associated industries dependent on the Sterlite plant faced considerable difficulties in terms of the cost of procurement of raw materials. “We have been forced to move out to Odisha, where we will now turn to Paradip Phosphates for our raw material supply and perhaps reopen when Sterlite Copper is back on track,” said N.P. Gopalakrishnan, founder managing director of Amrita Chemicals, which is closed following the shutdown of the copper plant. His company made sodium silico flouride from a waste acid of Sterlite that is used in the glass, rubber and other industries and half the production was exported. To meet the company’s export commitment, he had to sign deals with European suppliers.

A NITI Aayog-financed report by the Jaipur-based Consumer Unity and Trust Society, titled ‘Economic Impact of Select Decisions of the Supreme Court and National Green Tribunal of India: Synthetic Report’, stated that closure of the plant resulted in losses to the tune of Rs 14,794 crore to the stakeholders and indirect/ direct job losses of 30,000 workers. There were losses of Rs 491 crore for all downstream industries, besides total tax losses of Rs 7,641.8 crore to the government between May 2018 and May 2021.

With the demand building up for reopening, it will be a major challenge for Sterlite Copper to emerge equal to the task. In a recent tweet, the company said: “Sterlite Copper has a vision to be the world’s best sustainable green copper and nickel producer, delivering superior value to stakeholders by ensuring zero harm, carbon neutrality, water positivity, circular economy and fostering communities through a diverse and inclusive workforce.”

This is a turnaround from the earlier Vedanta stand of June 2022 when it had decided to put on sale the plant after facing several legal and political hurdles in reopening it, owing to various environmental issues. The company posted an advertisement inviting an expression of interest (EoI) from potential buyers for selling the plant, with July 4, 2022 as the deadline for submitting EoIs. It provoked pro-Sterlite protesters from several villages in the region to take to the streets in favour of the plant.

While inviting EoIs, the company had stated that the plant met about 40 per cent of India’s copper demand, contributed about Rs 2,500 crore to the exchequer and provided direct employment to 5,000 people and indirect livelihood to another 25,000 through the value chain. Vedanta claims the plant meets the highest environment standards and plays a vital role in meeting the growing domestic demand for copper and India’s commitment to a green economy.

The plant’s future is now for the Supreme Court to decide. In 2018, the NGT granted permission to reopen the plant but the very next year, the Supreme Court set aside the order and directed Vedanta to approach the Madras High Court for interim relief. But the high court dismissed the plea to resume operations prompting the company to move the Supreme Court. Vedanta has pointed out, among other things, that having invested over Rs 3,000 crore in the plant, the company has lost more than Rs 4,000 crore since its shutdown.

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