Vedanta Group profit may take 2-3% hit on Sterlite Copper closure

Photo: Reuters
The continuing shutdown of the Sterlite Copper Plant in Thoothukudi, Tamil Nadu, is likely to deliver a 2-3 per cent hit to Vedanta Group's profit. The company said it is putting on hold the construction of plant-II till such time as things settle down, and added that the focus will be on restarting plant-I.

The plant was shut down since March, initially as part of a yearly maintenance, and later due to the rejection of Consent to Operate (CTO) by the Tamil Nadu Pollution Control Board (TNPCB), followed by the state government's order to permanently close the facility. The government action came after a protest by the local population against the facility turned violent on May 22, claiming 11 lives in police firing.

While stating that false propaganda prevailed over the truth about the company, P Ramnath, CEO of Sterlite Copper, said that it was the construction of plant-II that had actually triggered the protest. He added that work on the plant has been kept on hold, while the focus would be on recommencing the plant-I.

Tamil Nadu Chief Minister K Palaniswami said on May 29, that the state's order to shut down the Sterlite Copper plant was legally valid and blamed the opposition party Dravida Munnetra Kazhagam for the violence in Thuthookudi (Tuticorin) on May 22.

Ramnath claimed that after the closure of the plant, sulphuric acid prices shot up 4-5 fold, while copper prices rose by 5-10 per cent and phosphatic acid prices went up by 20 per cent. Besides, it has taken a huge toll on the local economy, with nearly 30,000 people losing their jobs.

He said the impact on Sterlite is yet to be assessed as the company had, in any case, gone for a maintenance shut down in March. Sterlite Copper's annual turnover is around Rs 200 billion, with a 5-6 per cent profit. The company has been contributing around 2-3 per cent to Vedanta Group's profit.

Holding 'external forces' responsible for the mayhem, Ramnath was optimistic that his group is on a better wicket and claimed that the people had also started realising that external elements have misguided them. He claimed local residents were pressurising the state administration to reopen the factory.

"Our plant has been shut down for maintenance. In the last five to six years, there has been absolutely no incident. Suddenly, these issues are cropping up from nowhere. That's why we feel that there had been some kind of an instigation. Normally, the public won't react to this extent," said Ramnath.

On whether the company would look at others states for its plant-II, Ramnath said, "We have not thought about it."

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel