Lanjigarh 2014

MEERA MOHANTY, ET Bureau Oct 7, 2014, 05.50PM IST

Vedanta is embarking once again on expanding alumina refining capacity in Odisha that it had to shelved five years ago on environmental and other concerns. With the central government looking to revive big infrastructure projects, will this time be different? And will development score over environmental concerns?

Vedanta’s Lanjigarh refinery

In July, the Vedanta Group's Sesa Sterlite unit said that it had convinced locals at a public hearing to back plans aborted five years ago for sixfold capacity expansion of its refinery in Lanjigarh. Then in September, following a meeting with Odisha chief minister Naveen Patnaik, Vedanta chief Anil Agarwal announced a doubling of alumina refinery capacity within two years, with a confidence that belied the company's difficult experience in the state. After all, with no captive supply of key raw material bauxite, the company has been struggling to run the existing 1 million tonne plant at full capacity.

Last year the Supreme Court recognised the contention of Dongariah and Jarnia Kondh tribals who live on the high slopes of the nearby Niyamgiri that the 'daggar' or mountain itself was sacred. Following that, in January, the ministry of environment and forests (MoEF) rejected a plan to mine the 72 million tonne hilltop bauxite deposit for the refinery. Vedanta's controversial plan to extract Niyamgiri's bauxite deposit for the company's refinery had represented the clash of environmental and corporate interests in the country, which was playing out in other areas as well. One side of this argument sought to protect the interests of tribals and conserve natural resources, the other side argued such projects were essential to create the jobs that would rescue communities, neglected for decades, from the poverty and hardship of their daily lives.

With the belief that it could separate the two issues, Vedanta went on a hearts-and-minds campaign ahead of this year's July hearing, a prerequisite for the mandatory environment impact assessment (EIA). Karun Kant Dave, chief operating officer of the Sesa Sterlite unit told villagers that the company was looking to make a fresh start. "One of the things we did was to inform people, in right earnest, that this hearing was for the plant and had nothing to do with the mining project," he said.

The Dongariah Kondhs, one of Odisha's 13 'primitive tribal groups', accompanied by activist Lingaraj Azad had come to participate in the July hearing and reiterate their concerns. But they were dismissed by a local man of influence--Sridhar Pesnia, a labour contractor for Sesa Sterlite. Some of his comments on the day were construed as being derogatory to the tribals. He denied this.


“I said this hearing was for the expansion and not for mining Niyamgiri. Even monkeys would understand this but not our people,” he clarified. Pesnia also distributed sarees, umbrellas and chappals to villagers who attended, an annual practice he claims he reserves for this time of the year, coinciding with the popular Oriya festival of Raja.

Kalahandi additional district magistrate Sashadhar Nayak, who supervised the hearing, said it was a success despite the various interruptions. It was, he stressed, related to the refinery, not to the bauxite deposit, and involved a wider swathe of the population whose lives have been changed in one way or another by the refinery.

What’s happening in Odisha assumes wider significance in the context of the Narendra Modi government’s move to ease environment and forest laws to get big projects that have been entangled in red tape moving again as it looks to revive the economy. Two questions arise: Does this mean infrastructure development will override environmental concern? And, will the concerns of small groups be ignored as the wider community ostensibly looks to protect its economic interests?

The project located in one of the country’s most backward districts has had several run-ins with the MoEF, particularly during Jairam Ramesh’s tenure as minister. In 2009, the company said it had made a convincing case for expansion. But that hearing was discounted when the MoEF discovered it had already begun “pre-emptive” work, having spent Rs 5,000 crore or 50–55% of the budget by then. This included a pipeline — a subject of great distrust between Vedanta and its local critics — that would bring bauxite down from the hilltop deposit 4 km away.

What Azad of the Niyamgiri Suraksha Samiti and other project sceptics want to know is where Sesa Sterlite will get the bauxite needed to feed the plant’s expanded 6 million tonne capacity.


Dave pledged that the company wouldn’t look towards Niyamgiri unless there was local support. But activists aren’t convinced that the two can be delinked. Documents posted on the State Pollution Control Board, Odisha site refer to a deposit that’s 3.7 km from the plant site.

Bauxite remains a sensitive subject. Sesa Sterlite’s recent attempt to survey laterite deposits near Koraput already has villagers protesting, according to media reports. Laterite is an alternate mineral with low alumina content, permission to extract which Odisha can grant on its own. Sesa Sterlite says it’s counting on Odisha Mining Corp. for the supply of 150 mt of bauxite committed under its 2004 memorandum of understanding. Meanwhile it has filed 42 prospecting and mining applications.

In 2012, the company acquired a 24.5% stake in Larsen and Toubro’s near-dormant aluminium projects in the state. Last month, Agarwal told reporters, “We are talking to L&T, which has been allocated three bauxite mines, to tide over our raw material problem.”

Uncertainty over raw material, which had forced a temporary shutdown of the refinery in December 2012, has had repercussions on its smelter at Jharsugda, where alumina is converted into alumnium. A surge in the metal’s prices has made this end of the value chain viable again, provided it can negotiate cheaper power supplies.

There are other potential challenges, such as land. An additional 500 or 888 hectares (depending on the EIA version) apart from the 2,000 hectares it already owns is needed for “ancillary requirements” such as the red pond and fly ash pond to hold the byproducts. For this, three villages — Rengopalli, Bandagurha and Kothdwar — will have to be relocated. The mandatory gram sabhas have already been conducted according to a company spokesperson. The next few months will determine whether Agarwal’s optimism and the company’s efforts to rewin trust be borne out.

the red mud pond …to be expanded

Local economy

Rengopalli lies to the south of the so-called red pond, where waste from the refinery, a caustic soda mix, is collected. Sesa Sterlite said it is reducing the slush into a powder that can be used by cement makers, doing away with the risk of a breach in the pond walls. But villagers told ET that in summer this dust billows into low-hanging clouds, causing a burning sensation in the eye and nose.

“Had the company not started at all, we could have carried on with our lives. But it’s taken some of our more fertile land already,” said Karma Majhi, a Kutia Kondha tribal. “Then there is this red dust! Of course we want to be rehabilitated. But once relocated if we don’t get jobs we won’t even have our land and trees that we now live off.”

Majhi, trained as a fitter by Sesa Sterlite’s at the Industrial Training Insitute (ITI) in the next town, is employed by a vendor. As someone who had to give up his land, Majhi believes he should be directly employed by the Vedanta unit. Some of his neighbours who travel as far as Mumbai, Surat and Kerala for work, say Sesa Sterlite won’t hire them. In response to this, plant chief operating officer Karun Kant Dave has promised there will be “no more contract workers for unskilled labour jobs that can be done by locals.”

The 10 years of the project in Lanjigarh has helped boost the local economy, particularly in nearby Munniguda and district headquarters Bhawanipatna, where fortunes have waxed and waned with those of the plant. The prospect of the refinery persuaded Sushant Hiyal, a production manager and possibly one of the few Indian Institute of Technology graduates from the backward district of Kalahandi, to return home. He also built a small hotel but with guests down to a trickle, Hiyal is fighting for survival at the debt recovery tribunal.

Development effect

In a 2007 order allowing mining, the Supreme Court had asked Sesa Sterlite to pay 5% of its profit or a minimum of Rs 10 crore toward local area development. But with no mine in hand, the Lanjigarh Project Area Development Foundation special purpose vehicle (SPV) hasn’t seen fresh funding for the last three years.

“It’s not that the company hasn’t done any peripheral development activities — work has been done at Bhawanipatna railway station, the collectorate has been upgraded and ACs fitted. Vedanta has built a DAV school in Lanjigarh,” said Kalahandi additional district magistrate Sashadhar Nayak.

That irks the locals who don’t see how this development benefits them. To be sure, fund use is decided by representatives from the government and those who have sold the land to the project. The company says it has spent an additional Rs 150 crore on corporate social responsibility (CSR) on its own.

“The real problem is this is the only industry in the entire district. The next one is JK’s paper factory in next-door Rayagada,” said Sushant Hiyal, production manager and a local. Expectations are rising in some quarters. Some of those who gave up land say they want more compensation, comparable with what Sesa Sterlite paid recently for land acquired for its rail line in nearby Ambadala.

Local labour contractor Sridhar Pesnia blames the government for not doing enough “to bring Kalahandi’s tribals into the mainstream”.

“When Vedanta started out (in 2006) there were just two science or commerce graduates who made the cut as per the company’s hiring policy,” said Pesnia, himself a school dropout.

Officials at the Kutia Kandha Development Agency believe the tribals, unlike others like Pesnia and Hiyal, aren’t equipped to seize the opportunities offered by industrialization.

“The government must open a degree college or ITI (industrial training institute) — they don’t have the finances to go to even as far as Bhawanipatna,” said an official who asked not to be named. This is key to the issue — the area holds more than half the country’s bauxite reserves but the literacy rate stands at 25.5% (between that of Chad and Burkina Faso) against the state average of 73.45%.