The Tamil Nadu government on Monday ordered the closure of the Sterlite Copper factory in Thoothukudi, marking a significant setback for the Anil Agarwal-owned VedantaNSE -0.85 % unit, which is at the centre of a violent agitation led by residents who claim the smelter has caused widespread pollution of air and water in the southern city.

The government order endorsed the Tamil Nadu Pollution Control Board’s directive last week to close the unit citing constitutional provisions to “protect and improve the environment,” and “in larger public interest.” Within an hour of the order announced on Monday afternoon, district officials of Thoothukudi, headed by Collector Sandeep Nanduri, arrived at the plant to seal the premises.

“The decision to close the plant was arrived at upon consideration of the interests and sentiments of the people of Thoothukudi,” said chief minister Edapaddi Palaniswami speaking to reporters in Chennai.

He said that the prospect of a legal battle by Vedanta-Sterlite against the government order was “imaginary.”

Shares of Vedanta closed 0.48% higher on Monday at Rs 253.10. The stock had fallen to a 10-month low on May 23 and had been recovering since.

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In a late evening statement to the stock exchanges, Vedanta said: “We have received an order dated May 28, 2018 from the Government of Tamil Nadu directing the Tamil Nadu Pollution Control Board (TNPCB) to seal the company’s ‘Copper Smelter Plant 1 at Thoothukudi District, Tamil Nadu’ and to close the said plant permanently.

We are further studying the order and shall keep the stock exchanges updated on any developments.”

In a post on microblogging site Twitter, Ramnath P, CEO of Sterlite Copper, wrote “halting a big industry like Sterlite Copper has serious implications on the economy.” The three-month long agitation demanding closure of the plant turned violent last week as the state police fired at unruly mobs, resulting in the death of thirteen people.

The order to close the plant was issued after a meeting top of ministers — including deputy chief minister O Panneerselvam who visited the bereaved as well as those injured in last week’s police firing — and senior bureaucrats.

LIKELY IMPACTS
The Sterlite unit employs 3,500 employees directly, with company officials estimating that indirect jobs including vendors and contractors could take the figure up to 25,000. The 4 lakh tonne per annum copper smelter plant contributed to 5.4% of Vedanta’s consolidated EBIDTA at Rs 1,373 crore during financial year 2017-18. The carrying value of property, plant and equipment as on March 31, 2018 was 2% of total assets at Rs 2,131 crore, according to a company filing at the Bombay Stock Exchange.

The permanent shutdown of the country’s largest copper smelter will have wide ranging repercussions on domestic copper consumption, which is estimated to be growing at a compounded annual average rate of 5.9% in the last 10 years. The electrical and the transport sectors are two of the biggest copper consumers. With global drive on electric vehicles, copper demand is expected to get a boost.
The two other copper producers in India are state owned Hindustan Copper and the Aditya Birla Group’s Birla Copper.

FACING PROTESTS

Locals and environmental activists have long claimed that emissions from the Sterlite plant, one of the country’s biggest, are polluting air and water in the district, affecting people’s health. The plant has remained closed since March 27 when it began a 15-day maintenance shutdown. In April, the Tamil Nadu Pollution Control Board refused to grant a licence to operate the smelter while it was under a planned shutdown.

The matter is sub judice and the next hearing is on June 6. Legal experts believe the state’s move on Monday may not stand the scrutiny of higher courts. “(The order) is a knee-jerk reaction,” former Madras High Court judge K Chandru told ET.

The latest protests, which began three months ago, are directed against Sterlite’s plans to expand capacity at the Thoothukudi plant from 4 lakh tonnes a year to 8 lakh tonnes. The pollution control board had refused to renew the consentto-operate license of the plant citing deficiencies in the steps taken to control pollution.

Meanwhile, a public interest litigation filed by Fatima Babu, a lecturer and member of the MDMK, based in Thoothukudi, had won a stay at the Madras High Court on Wednesday, stalling the proposed expansion of the plant. The court delivered an interim injunction while directing the central government to renew the environmental clearance of the factory only after a public hearing, which is to be conducted before September 23, 2018.

Social activists tracking the longdrawn crusade against the copper factory are of the view that the prospect of a further legal battle is clear and present. “It is very likely that the company will move the Supreme Court against the closure order because the case against rejection of the consent to operate licence (pollution control board had refused to renew a licence for the plant) is going on at the appellate authority,” said V Ramasubbu, one of the litigants against Sterlite in earlier cases.

Political parties in the state faulted the AIADMK government for not acting sooner, which would have avoided the deaths. Vaiko, founder of MDMK and one of the petitioners in the 2010 Madras High Court case against Sterlite, alleged that the Tamil Nadu government had issued the order to merely save face. “Their intention is to escape the people’s wrath with this order… The Sterlite issue is far from over, the court’s decision has to come and whether it will be a repeat of 2013, I do not know.”

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