India may face copper supply disruptions following the Tamil Nadu government's decision to shut down Vedanta Sterlite's copper plant at Tuticorin, a closure that would force the industry to spend USD 2 billion in imports, a senior company official said.
The shutting down of the 400,000 tonnes a year copper smelter in Tuticorin will reduce India's copper production by about half, forcing imports.
"The sudden and arbitrary decision of Tamil Nadu government to close down our copper smelter in Tuticorin will have far-reaching ramifications for the economy of not only the town and its adjoining villages but also the country," said Vedanta Sterlite Copper CEO P Ramnath.
The closure followed the death of 13 people in police firing on locals protesting against alleged pollution by the plant.
"While an estimated 30,000 direct and indirect jobs are now on the line, a large number of small to medium enterprises that are dependent on our smelter for copper are also likely to suffer due to supply disruptions," he said.
Vedanta produced about 48 per cent of India's total copper output of 842,961 tonnes in 2017-18.
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"Since Vedanta Sterlite is one of the largest copper producers in the country, manufacturers in sectors ranging from electrical to defence will have to turn to imports and that will push up the nation's annual import bill by an estimated USD 2 billion based on the current price," he said.
Earlier in the day, Vedanta in a regulatory filing said it is "studying" the order of the Tamil Nadu government directing the Tamil Nadu Pollution Control Board (TNPCB) to seal and permanently close the company's Copper Smelter Plant 1.
"State Industries Promotion Corporation of Tamil Nadu Ltd vide its letter dated May 29, 2018, has informed the company regarding the cancellation of 342.22 acres of land allotted to the company for the proposed expansion of 'Copper Smelter Plant 2 Project' at Thoothukkudi District, Tamil Nadu. The land price for the same shall be refunded by SIPCOT as per their norms," it said in a separate filing.
The copper smelter serves over 800 small and medium enterprises (SMEs) in the downstream industry for the critical electrical sector. The bulk of supplies to the electrical sector are to units in northern and western regions.
It is also the major supplier of copper to the country's defence sector and other key sectors like infrastructure, cement and fertilisers.
The Tuticorin facilities include a custom smelter, a refinery, a phosphoric acid plant, sulphuric acid plants and a copper rod plant. In addition, there is a captive power plant located in Tuticorin and a refinery and two copper rod plants operating in Silvassa, western India.
The company's copper smelter in India recorded the highest ever production and the best-in-class operational efficiencies during FY17. The full year copper cathode production at Tuticorin was a record at 402,000 tonnes.
The official said with 400,000 tonnes of production capacity going out of circulation, India will be forced to import copper.
The move to shut down the Tuticorin facility will also push up global copper prices.
The shutdown will also hurt India's copper exports, as 160,000 tonnes of the production is sold internationally.
At the current price of USD 6,865 per tonne, the import of 240,000 tonnes of copper (net of export) will cost the nation around additional USD 2 billion per annum, he said.
Industry sources said the state government's decision to shut down the smelter is likely to result in a loss of 30,000 direct and indirect jobs.