Is it true that Vedanta is planning to shut down its copper smelter plant at Thoothukudi?

This plant in Tamil Nadu has been caught in a controversy over the last 4 years and has seriously impacted India’s copper equilibrium; converting it from a net exporter of copper to a net importer of copper. Now, the Vedanta group has finally decided to call it quits and have invited Expression of Interest (EOI) from interested parties so as to fully exit the Sterlite Copper unit in Thoothukudi in the state of Tamil Nadu. Vedanta has fixed July 04th as the last day to submit the expression of interest for the copper smelter.

First a quick background. The plant was the subject of protests from the environment groups who wanted the project stalled as it polluted the ground water in the area. In May 2018, things took a turn for the worse, as 13 people were killed and 102 injured in a police firing during a protest against the expansion of the Thoothukudi plant. After this incident, the smelter and refining complex was shut down. Sterlite Copper has consistently held that it had adhered to all norms and that the closure had led to India losing $1.2 billion.

The social and economic costs of the 4-year shutdown have been heavy. Nearly 120,000 people are estimated to have been affected due to the closure while around 400 medium, small and micro enterprises (MSMEs). The region suffered a loss of Rs700 crore per year due to the shutdown as the plant would produce 40% of India’s demand for copper. In fact, the plant alone contributed Rs2,500 crore to the government and was 12% of port revenues.

The Thoothukudi smelter had a capacity of 400,000 MTPA. It also produced sulphuric acid to the tune of 12,00,000 MTPA and phosphoric acid plant of 220,000 MTPA. Problems came to a head when Sterlite decided to double the copper smelting capacity from 400,000 tonnes to 800,000 tonnes. There had already been several incidents of gas leaks at the plant and the court thought it fit not to allow them to continue operations any further.

The question is why is Sterlite Copper looking to sell now? Clearly, there is no immediate visibility of the plant commencing operations for now. But more importantly, with the global recession likely to impact the demand and price of metals, Anil Agarwal is playing it safe and looking to exit before the recession really overtakes the global economic story. Softening of prices of metals and minerals is already visible. For Vedanta, this may be the right time to make an exit from the India copper business.