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Vedanta Sterlite’s Shutdown troubles over pollution

Sterlite Copper in the Indian Copper Market

Sterlite Copper, business unit of Vedanta Ltd., is the seventh largest copper smelter in the world, producing 4,00,000 tonnes of refined copper per year. Indian Copper market has three dominant players – Government owned Hindustan Copper Limited (HCL) having capacity of  99,500 tonnes of copper per year, Private company Hindalco Industries having capacity of 5,00,000 tonnes per year and Sterlite Copper another private company having the capacity of 4,00,000 tonnes of copper annually. As of 2017-18 Sterlite served approximately 36 % of the total Indian copper market.

Sterlite Copper logo

Sterlite’s Tuticorin Smelter’s Shutdown over Pollution Concerns

On 28thMay 2018, the Tamil Nadu government issued the orders for permanent shutdown of Vedanta’s Tuticorin smelter unit over environmental and pollution concerns. It had faced strong protest against the expansion of the plant capacity from 4,00,000 tonnes a year to 8,00,000 tonnes a year. The protest went on for 3 months leading to a loss of 13 lives in police firing. On 29thMay 2018, SIPCOT -Tamil Nadu’s industries promotion arm also canceled the allotment of 332 acres land dedicated for the expansion of the Tuticorin Copper Smelter.

Impact of Copper Smelter Shutdown

While operational, the plant accounted for 40 % share in India’s annual copper production of 10,00,000 tonnes. The closure of the plant has affected an estimated 800 small and medium units in the electric sector, including cable manufactures, winding wire units and transformers manufactures.

The shutdown of the Tuticorin plant has lead to direct and indirect job losses of up to 50,000. Since the shut down, the nation has imported 202 Kilo Tons of copper cathode, rods and wires from April 18 to November 18 in just 8 months, where as for the fiscal year 2017-18 the total import was 215 Kilo Tons, which is an increase of 41% in import of refined copper when compared to the previous year. The shut down is likely to impact India’s copper export as Tuticorn plant exported 1,60,000 tonnes a year.

Sterlite Copper Tuticorin Factory
Sterlite Copper Tuticorin Factory

Sterlite has also been a major supplier of copper to the country’s defence sector, infra and cement  sector. Along with the copper shortage, Indian market has witnessed Sulphuric acid shortage, which was also produced in the unit affecting the chemical and detergent manufacturers. The prices of Sulphuric acid have also risen three to four times. Sterlite was also the only domestic supplier of Phosphoric acid with a capacity of 220,000 MT, affecting the fertilizer industry as it is a key raw material for fertilizer manufacturing.

According to the latest report of global ratings agency Moody’s the shutdown will reduce Vedanta’s scale and business diversity, with fiscal 2018 revenues likely to shrink by 25% to $11.5 billion from $15.4 billion.

Industry Opinion on Copper Smelter Closure

According to the Deccan Herald news article of 20th January 2019, P. Ramnath CEO, Sterlite copper said “Cable manufacturers have been greatly hit due to the closure of Sterlite Copper plant and it has created a crisis of sorts in the small and medium enterprises. It made a huge impact in the beginning and though things have streamlined due to efforts by Sterlite, the crisis is yet to blow over and it will not unless the plant in Thoothukudi is up and running.”

As per the same article S Gurumurthy, Vice-President of Chennai based Chemical Industries Association, said the fertilizer and detergent industry was hit very badly due to non-supply of Sulphuric Acid from Sterlite plant. “Sulphuric Acid is the main raw material for producing fertilizer, detergent cakes, and powder. Many of the small-scale industries faced numerous problems due to the shortage of the acid.”

S S Rathi, Chairman, Winding Wires Manufacturers Association of India, said while the country was pushing for exports to earn forex revenue, here was a case in reserve. “We have been importing huge amounts of Copper. The sudden stoppage of supply has created a huge scarcity of copper and even the marginal price increase is a huge cost for small units. It is not possible to import copper at short notice.”

Legal Battle to open the Copper Smelter

On 18th February 2019, a bench headed by Justice R.F Nariman of the Supreme Court, set aside the orders of the National Green Tribunal judgment for re-opening the unit and gave liberty to Sterlite Copper to approach the Madras High Court.

P. Ramnath, CEO of the copper unit told The Print on the same day “The company will now approach the High Court in Tamil Nadu for an “urgent hearing” as early as possible.” “We have to get the actual details in it and based on that we will plan our next course of action” he added.

This article has some inputs taken from Sterlite Copper and The Economic Times