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The Union government will provide final clearance for Vedanta’s bauxite mining project in Orissa only if there is no violation of the Forest Conservation Act

The Indian government on Wednesday said that the Vedanta Group’s bauxite mining project in Orissa would be given a final clearance only if it doesn't violate the Forest Conservation Act, 1980.

A final clearance would be considered only after the ministry does not find any violation of norms under the Act and locals have agreed to the project after their rights are settled, environment and forests minister Jairam Ramesh told PTI.

“Already a month has passed since I have written a letter to the Orissa government and asked the chief conservator of forests to probe into it,” he said, adding that he will be receiving the report soon.

Mining behemoth Vedanta’s bauxite mining project at the Nyamgiri hills has been vehemently opposed by the locals, who regard the place as sacred. The Kondh tribals of Orissa say they worship the Nyamgiri as the abode of their deity Nyam Raja.

The ministry had issued a binding guideline to all the state governments last August that application for diversion of forest land for other purposes would be considered only after all due processes contained in the Scheduled Tribe and Other Forest Dwellers (Recognition of Rights) Act, 2006 have been fully and satisfactorily completed, Mr Ramesh said.

Vedanta had got in-principle approval in December 2008 for 800 acres for bauxite mining at Nyamgiri, out of which 350 acres were in the reserved forest area, the minister said.

According to the norms, a company cannot begin construction even in non-forest areas unless it receives a final clearance from the ministry. However, there are allegations that the company has already begun construction.

The minister said that since October he had done away with the system of two-stage approval (in-principle and final approval).

"Since October, we have introduced a single clearance system. While considering projects for approval, environmental issues and local interests are kept in balance," Mr Ramesh said.
 

Those cement companies which trade their excess captive power and are planning merchant power plants will be able to manage the industry cycle better, say analysts

Cement companies that have forayed into merchant power trading are expected to manage the cyclical downturn in the industry in a better way, say analysts. Industry experts too look at power trading as a profitable option.

“Shree Cement, JK Lakshmi Cement and Dalmia Cement—whoever has excess power, is trading it. However, Shree Cement will be doing it on a big scale. Cement is a cyclical industry, so it will help their (those companies trading in power) position now. With the power segment, they will be able to manage their margins better than other companies which are not trading in power. They would at least be able to manage the cycle,” said Amit Srivastava, research analyst, Karvy Stock Broking Ltd.

Cement companies at present are enjoying higher sales and a rise in price due to the peak demand cycle. However, analysts believe this surge in demand to be a short-term phenomenon and expect a price correction by March-April 2010. In the long term, the cement industry is expected to face an overcapacity situation, thus affecting the demand-supply ratio and cement prices.

Speaking on the profitability of trading excess captive power, R Gurumoorthy, spokesperson for Dalmia Cement Ltd said, “We will continue to trade excess captive power. Any player in any sector, who has excess power, will continue to sell to the grid as India needs power. While power generation costs you only around Rs3-Rs3.50 per unit for thermal energy, you are allowed to sell it at Rs12 per unit in a state like Maharashtra during peak hours. Even if we sell it at around Rs6 to Rs7 per unit, you still make a huge amount of profit. One always has 5% of the captive power available for sale.”

Addressing the problem of coal linkage for power production, he added, “The issue as to whether there would be sufficient coal linkages available can be addressed by importing coal.”

Dalmia Cement Ltd has already been trading its excess captive power. The company has a total power production of around 160 megawatts (MW) for both its sugar and cement plants. The company is also planning a solar power project in Jodhpur as a pilot project. Power produced from this plant will be available both for captive use and sale.

As per an ICICIdirect research note, JK Lakshmi Cement Ltd is expanding its captive power capacity to 66MW by setting up a 12MW waste heat recovery plant (WHR) and 18MW thermal power plant at Sirohi in Rajasthan. If the company is able to operate its cement plant at 100% capacity utilisation, then there will be no surplus power in FY10 and FY11. The note stated an expected revenue of Rs146.10 crore in FY2012 from the sale of 24.4 crore units (24.4MW) on merchant basis. The meaningful profitability from sale of power will begin only from FY12 with the 12MW WHR and 18MW thermal power plants coming on stream.

For the WHR plant, variable cost will be Rs 0.3-0.4 per unit only and it will generate carbon credit income. With the power purchase agreement (PPA) kicking in and captive power plants coming on stream, the company will have surplus power capacity, which it intends to sell on merchant basis.

Recently, Shree Cement announced plans to set up a 300MW merchant power capacity at Beawar in Rajasthan. The power generated from this plant will be sold in the open market and not used for captive purposes.