The mining space in India, which has the potential to attract $5 billion worth of foreign investment, is abuzz at the red flag given to domestic major Vedanta Resources (LON:VED) 's bauxite-mining plans in Orissa's Niyamgiri hills, and the green signal accorded to India's biggest Foreign Direct Investment project, the $12 billion iron ore mine and steel mill proposed by South Korea's Posco. Vedanta, controlled by billionaire Anil Agarwal, was awaiting permission to mine bauxite, used to make aluminum, for more than four years. The environment ministry dealt a body blow by withdrawing the permit, which threatened the planned $8 billion expansion of the complex. Minister for Environment and Forests, Jairam Ramesh, told mediapersons that Posco was a different proposition altogether than Vedanta, and that the two could not be equated on the same lines.

The decision to reject UK-based Vedanta's plans to mine bauxite was taken after due consideration. Not only has it brought to the fore the tighter enforcement of environment laws in India, it has also ensured that foreign investors keen to enter the country play by the rules of the game. ``On August 24, India's ministry rejected a $1.7 billion project by the London-based mining conglomerate Vedanta Resources to mine bauxite in Orissa, citing gross violations on several counts of Indian regulatory norms,'' said Rajeev Oshmoraye, an analyst with a foreign financial institution in Mumbai.

``The foremost objection was that it would displace tribals from their land. The decision was not wholly unexpected,'' he went on to add, ``for over the previous week, there was enough speculation in the media by political commentators as well as analysts that it was clearly curtains for Vedanta''. However, the analyst maintained, by rejecting permission, the Indian government had sent out a clear signal that investors wishing to invest in projects in India should not consider it a ``cake-walk''.

The decision ensured that the global market wakes up to the fact that India is clearly keen to enforce environmental rules, and that these decisions need not necessarily hurt growth in the process.

Reasons galore

Some have wondered at the Indian government's decision to okay a foreign investment project, while rejecting a home-grown Indian major's plans. They point to the fact that the environment minister's rejection came a day after Orrisa Chief Minister Naveen Patnaik met Prime Minister Manmohan Singh in Delhi, to seek…

Unlock the rest of this article with a 14 day trial

Already have an account?
Login here