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Deadlocked In Orissa

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Last week vedanta Aluminium, a subsidiary of Vedanta Resources, told the Orissa government that it would shut down its refinery at Lanjigarh from 5 December. The closure would be temporary, the company hoped. As the Anil Agarwal-owned company explained, the refinery needs bauxite to function.

The state government had promised steady supplies of bauxite when the project was signed. Orissa, after all, boasts of more than half of India’s bauxite reserves. Along with other mines, the state had allotted the bauxite mines under Niyamgiri hills to Vedanta as part of the deal. However, the Union environment ministry has barred the company from exploiting the Niyamgiri hill reserves. The state did try to supply bauxite from other areas, but apparently the supplies have been far from steady. Meanwhile, Vedanta says that its project is racking up losses because of inadequate supplies. Hence, it wants to close down the plant until supplies are assured.

Orissa is a bit of an oddity when compared with its peers. There are many states that are considered bad for business by industrialists because they have governments which are not particularly business-friendly.

A couple of Orissa’s neighbours fall in that category.

Naveen Patnaik, Orissa’s chief minister, is extremely industry-friendly though. His late father, Biju Patnaik, who was the chief minister for many years, also had a very business-friendly attitude. Both father and son have tried their best to attract big projects. The younger Patnaik  went out of his way to woo big investors — including Posco, ArcelorMittal, Anil Agarwal’s Vedanta and Tata Steel. Given the abundance of natural resources Orissa boasts of — it has enormous reserves of bauxite, iron ore, coal and chromite — the chief minister did not face problems in signing MOUs with investors.

Unfortunately, many of these projects have not progressed much. Even the ones which have moved beyond the planning stage are running way behind schedule. Others have got stuck because of land acquisition problems, objections from ministries dealing with tribal affairs or environment and forests. Senior associate editor Gurbir Singh travelled to Orissa to see why the state was fast turning into a graveyard of industrial intentions. His report is on page 36. 

(This story was published in Businessworld Issue Dated 17-09-2012)