Indian economy loses $2 billion on Sterlite Copper plant shutdown

Indian economy loses $2 billion on Sterlite Copper plant shutdown

Indian Market
by 5paisa Research Team Last Updated: 2022-07-27T11:59:28+05:30

Since May 2018, when the police fired at protesters outside the Sterlite Copper Thoothukudi plant in Tamil Nadu, the plant has been lying shut. After a long wait, the Vedanta group has decided to throw in the towel and find a buyer for its copper business in India. Obviously, things were not working and the courts had also refused to order the opening of the copper plant. Now, first estimates of the total loss to the Indian economy due to the shutdown are out and have been pegged at Rs14,749 crore or approximately $2 billion.

The copper plant was always in the eye of controversy from the time it was set up Things were fine as long as Sterlite Copper maintained the production capacity at 4 lakh metric tonnes per annum (MTPA). All hell literally broke loose when Sterlite Copper announced plans to double the capacity to 8 lakh MTPA. That was when protests reached a crescendo and led to the loss of 13 lives in police firing, which eventually led to the closure of the plant. Now the losses are reported after 4 years of the plant being shut.

How was this loss arrived at. According to an estimate by CUTS International, this is based on the data collected and analysed from all perspectives. Hence, this represents the losses to all stakeholders including the government, the state, the ports, the investors etc. That figure is estimated now at close to $2 billion. In percentage terms, the cumulative loss for the entire period of plant closure of nearly 4 years is approximately 0.72% of the State Gross Domestic Product (SGDP) of the state of Tamil Nadu.

However, this does not include the loss to the company and that figure is pegged at Rs4,777 crore and it is not clear what portion of that loss is insured and what portion of the loss the company will have to take upon itself. Apart from the CUTS International report, there was also a report that was commissioned by the Niti Aayog to study the impact of the closure on the economy as a whole in terms of revenues. It is estimated that the government had lost a considerable revenues in the form of taxes and duties due to the prolonged closure.

The battle between economic development and protection of the environment is as old as the hills. Even in the case of the Carmichael coal mines in Australia, Adani had to face a lot of protest from environmental groups. But, that is where the state and national bodies need to aptly intervene and sort out the problems the way the state of Queensland in Australia has done. It is absolutely criminal that the Indian economy has lost close to $2 billion purely due to the lack of quick decision making. 

The copper plant was not just a big employment and ancillary jobs creator, but it was to also position the Thoothukudi port in Tamil Nadu as a premier export centre. That is now unlikely to happen in the foreseeable future. Sterlite Copper, on the other hand, has time and again denied allegations of its plant polluting the local environment and had moved the Supreme Court for the opening of the unit. However, the final word from the apex court in India is still awaited and meanwhile, the Vedanta group has started running out of patience.

But the real impact is a lot more regrettable. The Thoothukudi plant was a national asset and had been ably catering to 40% of the domestic demand for copper. As a result of the closure of the Thoothukudi unit of Sterlite Copper, India has moved from being a net exporter of copper to being a net importer of copper. That is the sad part of the story.
 

 


Start Investing in 5 mins*

Get Benefits worth 2100* | Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Disclaimer

Investment/Trading is subject to market risk, past performance doesn’t guarantee future performance. The risk of trading/investment loss in securities markets can be substantial. Also, the above report is compiled from data available on public platforms.

Open Free Demat Account

& get benefits worth 2100*

Resend OTP
Please Enter OTP
  • Have Promo code?
  • Use code ACT2100
Enter Promo code
Account belongs to

By proceeding, you agree to the T&C.

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number