Vedanta Resources Limited analysis

Vedanta Resources Limited analysis

Company Background

Vedanta Resources Limited is a globally diversified firm that deals with natural resources with interests in iron ore, zinc, lead, silver, copper, steel, aluminum, power, oil, and gas. The organization operates in Zambia, Namibia, South Africa, India, Ireland, and Australia. The firm has been in the mining industry since 1976, after being founded by Anil Agarwal. The company was listed on the stock exchange in India in 1988 and also became the first Indian manufacturing firm to be listed by the London stock exchange in 2003. Vedanta Resources also owns several subsidiary companies such as Hindustan Zinc Limited, Bharat Aluminium Company, and Madras Aluminium Company. Besides, Vedanta also has a significant stake in Sesa Goa, an iron ore exporter. The organization has been growing by acquiring stakes in other mining companies. In 2004, Vedanta acquired a 51 percent stake in Konkola Copper Mines in Zambia.

The company works with different contractors within the countries it operates and has more than 65,000 employees around the globe. The corporation’s current CEO and founder Anil Agarwal owns more than 50 percent of the shares in the firm. Despite the various subsidiaries of the organization, it is managed by one board led by the CEO. The corporate goal of Vedanta is to create value to shareholders by carrying out research about mineral deposits, acquiring, mining, and processing them to meet the market demands. Vedanta Limited has established different processing companies around the world, particularly where it has established its mining operations. The processing of the minerals happens at specified mineral processing centers before being exported to various markets around the world.

Vedanta Resources Limited enjoys a significant market share in the mining industry. Being one of the oldest firms in the sector, Vedanta enjoys a substantial market, particularly in the markets that it has been operating for decades. However, the firm is currently facing stiff competition from other players in the industry, such as Freeport-McMoRan, Sasol, Alfa, and Trilogy Metals. New market players have led to the intensification of competition in the industry.

How Governor Acts Upon the Project

The Vedanta project was meant to mine bauxite in the Niyamgiri hills. The company applied for a clearance permit from the department of environment in Orissa in 2003 for the construction of an alumina refinery project. The firm received a clearance to go on with the project after assuring the department that it will not have severe impacts on the environment and the local tribes living in the mountains. Being the heads of the states in India, the governors have the powers to approve such projects depending on the reports received from the relevant bodies. With regard to the Vedanta mining project, the governor was supposed to receive a clearance report from the ministry of environment detailing the potential effects of the alumina refinery project on the environment as well as the local community. Upon receiving an assurance that a project is safe to the environment and the local community, the governor is empowered by the law to give the go-ahead through the respective ministry. Another aspect that the governor considers is the possible economic effects in his state and particularly the community in which the project is being undertaken. In the case of the Vedanta project in Niyamgiri, the governor received a clearance report from the department of environment that the plan will not lead to deforestation and damaging of the terrain in the hills. However, it was later revoked because it had the potential of damaging the environment and was also likely to interfere with the ways of life of the local tribes that depend on the forest for their food and shelter. Despite the clearance from the Orissa state government, the supreme court revoked the initiative on the grounds of environmental degradation and being a threat to the culture and lifestyle of the indigenous tribes inhabiting the hills and with a strong spiritual attachment to it.

An alternative for the Project

Odisha state is one of the wealthiest states concerning deposits of natural resources. The state’s natural resources include deposits of iron, steel, oil, and other minerals. Vedanta Limited had already invested in the plant in Niyamgiri before it was rejected by the local community and the supreme court. The main allegation for its rejection was that there was no proper environmental impact assessment that was done before clearing the mining process. The company had constructed a factory that would be used to mine bauxite from the hills. Various investors had also invested their funds in the project and were expecting it to start as had been stipulated.

Since Vedanta Resources Limited had signed an agreement with the Odisha state government, the company needed to be given an alternative mining site within the state. The project was to be undertaken on a 1-million-ton refinery, and the state must compensate it with a mine of equal value. The law on natural resources in India permits state governments to lease their minerals within a specific period. Vedanta Resources Limited expects that the state will announce new mining sites and will be given one to compensate for the Niyamgiri hills bauxite mining. The Odisha state has the most significant percentage of steel produced in India, and it is expected that Vedanta Limited will be allocated one of the steel mining sites as compensation for the Niyamgiri site. Since Vedanta also deals with steel, such an alternative will be significant for the firm.

Another possible alternative for the Niyamgiri bauxite site will be the allocation of an oil mining site. When the government announces for the next round of oil extraction sites, Vedanta is also optimistic that it will be allocated one place as an alternative for the blocked project. The organization seems to be interested in getting an oil deposit equivalent to the earlier project. The firm’s management has already shown interest in taking one of the major oil sites when the state government gives them to investors. Vedanta Resources Limited has a high chance of being allocated an alternative place because of its current record in producing the country’s natural resources. In India, Vedanta provides 95 percent of the country’s silver, 30 percent of oil, 70 percent of aluminum, 65 percent of lead,95 percent of zinc, and 50 percent of India’s copper. The company expects to expand its dominance in the production of natural resources in India if it is allocated an alternative site, particularly an oil deposit.

Purpose and what this project will provide to the economy

The Vedanta project in Niyamgiri was approved for commercial purposes. Odisha state is one of the richest states in India concerning the availability of various natural resources. The region enjoys a wide range of natural resources including oil, and metal ores. Odisha accounts for a large percentage of the minerals that India produces and exports to foreign markets. Regardless of this richness, Odisha has some of the most impoverished populations in the country. The Vedanta project in Niyamgiri had been projected as a potential boost to the economy of the state and the nation. A majority of the local people in Niyamgiri live below the poverty line, and most of them are not educated.

The Vedanta project in Odisha state had great potential of boosting the local economy, particularly in the region in which the mining was to be done. According to the reports from the firm, the one-million-ton refinery had employed more than seven thousand people when the construction was still on. The number of people employed by the company was to rise by double digits when the mining of bauxite starts. However, the blockage of the process has resulted in a decline in the number of employees, and it is likely to affect the country’s economy since there will be no generation of tax. The state was also expected to benefit by earning a certain percentage of the total earnings from the project. The project would have also helped to build amenities such as schools and hospitals for the local community. The people living within and around the Niyamgiri hills have no access to such fundamental facilities, and one of the corporate social responsibilities was to build schools and hospitals. A combination of such economic benefits would have been of considerable significance to the communities in Odisha state; nevertheless, the project would have jeopardized the ways of life of the people and environmental degradation.