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Do you think the TN government decision to close sterlite plant hurt industries?


The Tamil Nadu governmentís decision to close the Sterlite plant in the area is an involuntary impulse. This permanent shut down has significant implications for domestic industries. There could be two perspectives to look at this situation , one from the environmental angle and other through the economic lens. What is generally understood in practicality is that both these perspectives are at the loggerheads but with the fine understanding one can find that both are in tandem as the environmental protection necessitates the economic growth in future.

First let us analyse and figure out the reasons behind this closure.

  • Impact on environment : Studies have established the damage emissions and discharges from the plant were having on the quality of air, water and soil in the vicinity.
  • Mass agitations with the unfortunate death toll of 13 on 22nd May

Looking at these two aforementioned points government is said to have passed this order . But what the government failed to understand is the logic or the reason behind these two factors . If we talk of Environmental impact then from the outset when this plant was granted approval to be set up in thootukudi, local groups had expressed fears about the impact of pollution but the state government facilitated the installation of the copper smelter arguing that it was essential for industrialization and creating avenues for employment. But this is contrasting the governmentís present stance. So not only does it show caving into pressure , but it discourages industry and damages the economy. But the larger challenge , one that India has consistently failed to address, is how to ensure that industrialisaton is not at the cost of health of people and the environment. Despite laws and conventions, ways to sidestep these and err on the side of industrial interests have now been perfected to a fine art. The other aspect that has not been acknowledged fully is that the agitation in Thoothukudi was not an overnight phenomenon. It has been building up over the years and 22 May marked 100 days of the latest phase , if they are stonewalled and their questions are not answered , they will necessarily come out on the streets . Yet the very fact that people are now aware of environmental disasters is in fact positive, something that could be built upon to arrive at sensible industrial location policies that do not engender the lives of people.

Looking into the economic aspect , The unit had a capacity of 400,000 tonnes, of which 45% was exported mainly to China and the Far East and West Asia, while the balance 55% was sold to domestic customers. A sudden permanent shutdown will lead to disruption in the supply chain of copper. Also the company catered 800 small and medium enterprises across the country. The reduction of domestic copper in the country will force the country to import copper at huge cost , India may emerge as a net importer of copper, from being a net exporter. According to Sterite Copperís CEO , the demand would be addressed by additional imports that would cost $2 billion of forex outflow.

This is also a blow to the stability that the downstream industries had with supplies from Sterlite. According to industry experts, companies in sectors such as consumer durables ( fans, air conditioners), power cables and the electrical industry will be hit, given that they are big users of copper. Also , India has three companies who manufacture copper viz Hindalco, Sterlite and Hindustan Copper with 413,806 , 403,206 and 25,949 tonnes of production in FY18 respectively. With the closure of Sterlite, supply chain will be affected severely and we will have to rely only on one supplier, which is not healthy from the business point of view.

Over and above it also hurts PM Modiís efforts to showcase India as an investment friendly country. If domestic industry cannot function how will foreign companies do ? The state government must think hard about such decisions. Shutting plants may make activists happy but the long term repercussions of such an action arenít good. Let pragmatism prevail over politics.

-Vinita Pahel