UK Company Vedanta Resources Bauxite mine plans turned down by Indian Environment Ministry, the $8 billion investment now in Jeopardy

In a move that jeopardizes Vedanta Resources $8 billion investment in India, the Indian Environment Ministry Tuesday announced that it had turned down the UK firm’s plan for a Bauxite mine in Orissa. The announcement comes as a shocker to Vedanta Resources, the India focused mining group that is still struggling with regulatory issues in the country.

Even though the rejection concerns one mine, Vedanta Resources operates an alumina refinery on bauxite imported from other parts of India. The rejection comes as a big blow to the UK firm. The Indian government made its decision known in statement, coming in the wake of regulatory hurdles Vedanta is still facing in its other offer for Cairn India. The Cairn India deal is pegged at $9.6 billion.

Vedanta Resources had initially planned to expand its aluminum capabilities through the $8 billion investment in Orissa, a move that has been dealt a huge blow. The government further said in the statement that it will be issuing a show-cause notice and would take further penal moves against the UK firm for what it considers violations of a number of environmental laws.

India’s Environment Minister, Jairam Ramesh, said Tuesday that Vedanta Resources Plc has been found to be in breach of certain laws and action is to be taken accordingly. Further to that, Ramesh said the firm had committed serious violations of India’s environment act and forest right act, reiterating that the decision to reject the mining plans were purely legal.

Environmental concerns have beleaguered Vedanta’s investment plans aimed at developing bauxite reserves as local communities have risen up against them, citing massive environmental damages.

The investment plans have been under siege for four years and in June, a panel was created to investigate the effects of mining on the local communities. The Panel’s verdict was the rejection of Vedanta’s plans. In their report, released this month, the four-man panel reiterated that allowing Vedanta’s plans would surmount to depriving two primitive tribal groups of their rights over the proposed mining sites.

Vedanta Aluminum won approval for an $8 billion expansion from the Orissa government to increase its smelter and refinery capacity six fold each to 1.6 million tons and 6 million tons respectively. Vedanta Resources Plc is an LSE-listed diversified FTSE 100 metals and mining company, and India’s largest non-ferrous metals and mining company in terms of revenues.

24 Aug 2010