The stalemate has existed for over six long years. With the plant closed, many downstream units have fallen on bad days. Thoothukudi is now a ghost town.
New Delhi
A crucial hearing in the Supreme Court next week could set the tone for the future of Asia’s largest but disbanded copper plant in Tamil Nadu, offering the proverbial light at the tunnel’s end to balance environmental concerns with necessities for investments and growth.
The Sterlite stalemate must end, so claim economic experts and top bureaucrats. And the faster it is resolved, the better it is for the nation and its economy. But it is stuck in a legal logjam.
Vedanta, India’s largest mining company, has hopes it will be able to win the arguments and the plant will open. Earlier this year, the apex court had allowed the Vedanta group to carry out upkeep of its copper unit in Thoothukudi under the supervision of a local level monitoring committee. The top court had also allowed evacuation of the remaining gypsum at the plant and allowed the companyto retain a sizable manpower as requested by the company. The plant has been closed since May 2018.
The plant can remain closed, argue environmentalists and officials of the Tamil Nadu government who have alleged the plant polluted groundwater, released toxic fumes, and spilled toxic waste into the sea. Sterlite has contested the charges.
There are other issues that impact the crisis. The Ministry of Home Affairs (MHA) informed the Rajya Sabha on 5 April 2023, that it was examining complaints against an NGO—The Other Media—for misusing foreign funds to organise protests and demonstrations around Vedanta’s Sterlite copper plant. Responding to a question by Congress party’s Naranbhai J. Rathwa, Minister of State for Home Affairs, Nityanand Rai said in a written reply, that it had received some representation and complaints alleging violation of the Foreign Contribution (Regulation) Act, 2010 (FCRA) by the New Delhi-based NGO. “Inputs of field agencies have also been received. In such cases, a standard questionnaire is issued to the association seeking detailed information and the same is examined in terms of provisions of the FCRA, 2010 and rules made thereunder,” the reply said.
Does that mean the protests were motivated?The Sterlite plant issue has gained national importance, ostensibly because the shutdown has led to a surge in copper imports. What’s more, the imports are skyrocketing since the metal finds large-scale application across sectors.
But the slugfest continues, the closed plant hangs over Vedanta like the proverbial sword of Damocles. The stalemate has existed for over six long years. With the plant closed, many downstream units have also fallen on bad days. Thoothukudi is now a ghost town. The impetus for closure of the plant in Thoothukudi—where workers are still displaying plenty of forbearance—isn’t entirely economic. There’s a lot of politics involved.
In the end, it is all about copper.
When operational, the plant accounted for 40% of the total domestic output of copper. In addition, it was the single largest producer of sulphuric acid in South India. The plant provided direct employment to about 4,000 people and 25,000 indirect jobs and worked with 400 downstream MSMEs.
Fast forward to the first quarter of FY24—India’s imports for refined copper for April-June period galloped 231% to 117,753 tonnes from 35,503 tonnes a year ago. In terms of foreign exchange outgo, India spent $920 million compared to $345 million in the same period last year. Further, copper imports rose by 43% to 332,000 tonnes during April-June from 233,000 tonnes a year ago while the import bill rose 18% to a staggering $2.45 billion. On the other hand, the domestic production of refined copper fell 21% in this period to 102,000 tonnes from 130,000 tonnes a year ago.
Clearly, this is a huge economic cost for the nation, especially when there is adequate domestic capacity available. Vedanta has fought hard to raise the issue of domestic copper production in India, since the conglomerate has not liked the fact that the Indian industry is resigned to rising copper imports.
There are other issues as well. Copper production in India has slipped into an uncharted territory, almost like the iron ore mines in Goa, Odisha and Chhattisgarh where protests by environmentalists prevail over the works, impacting production.The Indian copper crisis is wreaking havoc in the country, brought on by a number of elements, such as the demand-supply imbalance in the global copper market, high copper prices, and significant supply interruptions in the domestic market. Figures from the government show domestic demand for copper grew by 18-20% year-on-year, mainly due to the rebound in economic activities in sectors such as power, automobile, infrastructure, and construction.India produced 800,000 tonnes of copper in 2021-22 and consumed 1.9 million tonnes of copper in 2021-22.
Experts say the demand for the green metal in India is expected to stay elevated. As construction, infrastructure, and electrical and electronics sectors develop, India’s need for copper will continue to rise year-on-year. And then, India’s copper output has been falling as a result of the exhaustion of its current mines and the absence of new mining developments. This is not all. There are high import tariffs. As a result, copper imported into India is more expensive than copper produced domestically.
The government, claim sources, is justifiably worried. In order to lessen India’s dependency on copper imports, the government is investing in exploration and mining. To lessen India’s reliance on imported refined copper, the government is supporting domestic copper processing. The government is also promoting the use of copper scrap, so as to lessen India’s need for virgin copper.
India needs copper badly because it is promoting electric vehicles where motors, batteries, and cables all contain copper. In the upcoming years, it is anticipated that the use of electric vehicles would increase, driving up demand for copper. Need for copper will also be felt in renewable energy projects like solar and wind farms. It is anticipated that demand for copper would increase due to government initiatives to lessen reliance on imports and the development of new sectors that need copper.
Despite robust demand, the Indian copper market is going through some turbulent times. There is a high cost of manufacturing, labour and energy. Copper production in India is particularly expensive. There are serious infrastructure issues. Transportation of copper could be both costly and challenging if there is insufficient infrastructure, such as highways and ports. And there is a serious scarcity of skilled workers.
So, the issue, again, boils down to theThoothukudi plant and whether or not it will remain shut. It is the perfect one step forward, two step backward case. The Madras High Court, through its 18 August verdict, upheld the decision of the Tamil Nadu government, blaming Sterlite for violation of environmental rules. The court judgement came after theNational Green Tribunal had in 2018asked the Tamil Nadu government to allow reopening of the copper plant.
The sociological impact of such agitation-led shutdown is unlike any seen since the 1970s collapse of Bengal’s industry, and the 1982 cotton mill workers agitation in Bombay.
Experts claim that in India, the big industrialisation debate is always without logic. Activists say mining companies rarely value environmental laws; the mining companies say protestors work with vested interests, and do not understand the intricacies of environmental laws. For example, can there be illegal iron ore mining if all mines are situated cheek by jowl in a state? Or can there be environmental violations if the NGT issues a safety clearance?
The plant became a political tinderbox after the police firing on protesters in Thoothukudi caused 13 deaths in May 2018. It was the biggest trigger for the shutdown.
Lost in the middle is both business and growth.Big plants are ventilators, vital for treating the economy. From being a net exporter of copper, India became a net importer of the metal for the first time in 18 years since 2019 after Sterlite Copper downed shutters in May 2018. While genuine environment concerns must be addressed, the plant needs to be back on its feet and address the demand for the critical metal.
A sense of unease has gripped the corporate world.
The Central government is working overtime to create a more enabling environment for investors, confirmed by a massive improvement in India’s rankings in the World Bank Ease of Doing business Index. Unfortunately, the Centre’s enthusiasm is not shared by many state governments. Many states still have a bewildering array of rules and regulations that areactuallya challenge to investors. In India’s federal set up, state governments have a lot of power. And sometimes, that very power of the state government works against the interests of the nation.All eyes are now on the country’s apex court.