Vedanta’s plan to sell off its closed copper smelter plant in Tuticorin, Tamil Nadu, could play out in several different ways, metal industry executives and analysts said, but towards the same outcome — the unit not getting restarted.
Last month, the Anil Agarwal-promoted company invited expressions of interest for the copper smelter with a deadline of Monday, July 4. The offer includes the sale of the copper smelter complex, sulphuric and phosphoric acid plants, copper refinery, a captive power plant and a residential colony, among other associated infrastructure.
When functioning, the plant addressed almost 40 per cent of India’s copper demands but was shut down by the Tamil Nadu Pollution Control Board in May 2018 after violent protests emerged outside the plant because of environmental concerns, leading to 15 people being killed by police firing. In March 2020, the Madras High Court dismissed Vedanta’s pleas challenging closure of the plant, and the company then appealed against the order in Supreme Court, which started hearing the case in March this year. The company’s plans to sell the plant has come even as the apex court is yet to give its verdict.
“We do believe that there are a lot of sensitivities involved, and any bidder looking to acquire the Tuticorin plant is going to very critically evaluate restarting production. The Supreme Court decision is also pending, and there is no political support from the state government,” Hetal Gandhi, director, CRISIL Research told The Indian Express.
Gandhi also pointed out that because of the rising demand for copper, new players are showing interest in entering the sector. Ahmedabad-based Adani Group has started work to build a 1 million tonne per annum copper plant in Gujarat, which the company says will be one of the biggest copper refinery complexes in the world. It is expected to start production by 2024. “If you see, a new area that Adani is entering, like cement, has been through acquisition at a very high premium. So for the copper unit also, if they saw a remote chance at restarting production (at the Tuticorin plant), they would have tried (to acquire) it,” Gandhi added.
A senior executive at a state-owned mining company said that Vedanta’s move to sell the copper plant could be a strategy to pressurise the government. “State governments are very keen on bringing in new investments, and the sale of such a major plant could send the wrong message for the political leadership. But also keep in mind that the Tuticorin issue is a very politically sensitive issue. Neither of the major political parties in Tamil Nadu have supported reopening of the plant. Even with a new owner, the obstacles to restart the unit still remain,” the executive said. An e-mail query sent to Vedanta in India did not elicit a response.
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Analysts said that the plant’s operations assume significance given India’s import dependence for its copper needs. “Since 2018-19, India is importing copper in different formats. In 2020-21, almost 52 per cent was being met through imports, and in 2021-22, this number jumped to almost 61%. So while the demand for copper is rising, we are seeing share of imports is actually going up. This includes both primary and secondary copper,” Gandhi said.
Saurabh Bhatnagar, partner and metals & mining consulting leader, EY India, said: “Copper is a major component in many industries, with the electrical and telecommunications industries being the largest consumers, followed by transport, consumer durables, building & construction and engineering goods. Therefore, its usage remains a good indicator of economic health. With a consistent GDP growth of the country, and with a dip in domestic production, imports of refined copper increased to 92,290 tonnes in 2018-19 from 44,245 tonnes in 2017-18 while exports declined to 47,917 tonnes from 378,000 tonnes during this period”.
“India will continue to import more copper in various forms in the country to meet its growing demand,” he added.