INDIA BUSINESS WORLD - NOVEMBER 16^th - NOVEMBER 30^th - 2007

SUPREME COURT NIXES VEDANTA ALUMINA MINE PLAN

The Supreme Court has declined permission to the Anil Agarwal-promoted Vedanta Alumina to mine bauxite for its proposed Rs 4,500-crore aluminium refinery project in Orissa. The apex court, however, allowed Sterlite Industries to take clearance from it for extraction of bauxite from the nearby Niyamgiri hills in collaboration with state agencies. The exact import of the court's order was not entirely clear because the ruling allowed Sterlite to approach the court with a modified scheme. The court also gave permission to Sterlite Industries to move the court within eight weeks if it is ready to go ahead with the project subject to compliance with certain modalities.

The UK-based Vedanta Resources and another group firm Sterlite Industries together hold 94% stake in Vedanta Alumina.

Welcoming the order, Sterlite Industries Business Development Centre head CV Krishnan said: "We will approach the apex court with the stipulated time for clearance of the project. We are committed to the project. Whatever, the conditional arrangements will be we will comply with those."

In a separate statement, the group said that the Supreme Court has given certain directions with regard to its application to commence the bauxite mining project at Lanjigarh in Orissa. "We are unable to respond to speculation regarding the directions of the court at this stage as we have not yet received the judgement. We will make a further announcement as soon as is practical," the statement said.

The Orissa government in collaboration with Orissa Mining Corporation and Sterlite will have to set up a special purpose vehicle to develop the scheduled area, the court said. A bench popularly known as the Forest Bench, comprising Chief Justice KG Balakrishnan, Justice Arijit Pasayat and Justice SH Kapadia, said: "We are not inclined to grant approval to Vedanta Alumina (VAL)... From the financial statements it is clear that it is not a subsidiary but an associate of Sterlite and we don't have its list of assets with us."

Justice Kapadia reading out the verdict said Vedanta Alumina can withdraw from the arrangement any time as its operating profits were negligible. As per Vedanta's website, its profits from aluminium segment were just Rs 455 crore, the court said, adding "it did not have the accounts of Vedanta and thus cannot take the risk of handing over the project".

The court also referred to a report in the Times of India which had said that the Norwegian government had decided to ban Vedanta from their country for non-compliance of forests and labour laws.

While VAL is not listed on Indian bourses, Sterlite shares are traded on Bombay Stock Exchange and National Stock Exchange.

While stating that Sterlite will have to contribute in terms of money and employment, the apex court asked it to keep aside 5% of its net profits from its mining activities all over the country or Rs 10 crore, whichever is higher, for tribals and shell out Rs 50.5 crore toward wildlife and Rs 12.5 crore toward tribal development.

Besides, Sterlite should give details about the number of people to be given employment and at what positions, he said, adding that the state government will have to stick by the project in case Sterlite backed out.

Coming down heavily on Vedanta, Justice Kapadia said its affidavit submitted on November 2 failed to give details about the number of jobs to be provided to locals as most of its activities were to be outsourced.

According to the court, it was the state's duty to devise a coordinated programme to meet sustainable area development. The court passed the order after environment groups and wildlife enthusiasts challenged the plan, saying it would displace tribal people and destroy flora and fauna of the region - a charge that Vedanta has denied.

When asked about the condition of depositing 5% of the NPV of diverted forestland for undertaking mining operation, Mr Krishnan said: "We will comply all those forests and labour laws for making the project go ahead."