India rejects Vedanta bauxite plans for Orissa

India has rejected plans by Vedanta Resources to mine bauxite in a pristine mountain deemed sacred to an indigenous tribe, setting back the London-listed miner’s plans to produce 6m tons of aluminium in the eastern state of Orissa.

In a further blow to the Indian company, Jairam Ramesh, India’s environment minister, has threatened to cancel approval for Vedanta’s 1m ton Lanjigarh aluminium refinery – now operating at a fraction of capacity due to a bauxite shortage – citing “serious transgressions” at the site.

Mr Ramesh said that Vedanta, which invested $5.4bn (£2.9bn) in the aluminium complex as of the end of March, had started work to expand the refinery’s capacity to 6m tons a year without obtaining the required environmental clearance.

Separately, the minister said he was probing whether Vedanta had been sourcing bauxite from illegal mines in neighbouring states, while waiting for the go-ahead for the controversial mine in Orissa’s Niyamgiri Hills.

The rejection of the proposed Niyamgiri mine is the culmination of a protracted campaign to draw international attention to what activists claimed was Vedanta’s unethical conduct in Orissa’s remote Kalahandi region, home to a primitive 8,000 member Dongria Kondhi tribe.

India’s decision also comes a week after Vedanta revealed plans to convert itself into “India's natural resources champion” by paying up to $9.6bn for a majority stake in Cairn India, the British-owned oil exploration company that has emerged as one of the subcontinent’s largest private energy producers.

Mr Ramesh – who has made clear his intention to put teeth into India’s often- ignored environmental and social protection laws – said Vedanta’s violations of Indian law were “too egregious to be glossed over”.

A committee appointed by Mr Ramesh to review all the evidence against Vedanta and its defences, accused the company last week of “total contempt for the law”, of trampling the rights of illiterate tribal people – who form the cadre of India's Maoist insurgency – and of potentially serious consequences for national security if the project went ahead.

“There is no emotion, no politics in this decision,” Mr Ramesh said. “I have taken a decision in a purely legal approach.”

Vedanta on Tuesday denied any wrongdoing, saying “there has been no regulatory violations of any kind at the Lanjigarh refinery”.

Survival International, the UK-based group that led the global campaign against Vedanta, was jubilant at what it called a “stunning victory”.

“The era when mining companies could get away with destroying those in their path with impunity is thankfully drawing to a close”.