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Explained: Vedanta-Foxconn semiconductor plant controversy

Explained: Vedanta-Foxconn semiconductor plant controversy

As consolation for missing out on a multi-core investment opportunity in the form of a $22bn Vedanta-Foxconn semiconductor plant, Prime Minister Narendra Modi has “promised” Maharashtra an “equally strong or even better investment”.

The Gujarat government has partnered with Vedanta and Foxconn with the aim of making an investment of Rs 1.54 lakh crore to achieve self-sufficiency in the field of semiconductor manufacturing.

In the presence of Chief Minister Bhupendra Patel and Union Minister of Electronics and Information Technology Ashwini Vaishnaw, a Memorandum of Understanding (MOU) was signed with the state government to establish the semiconductor plant.

Prime Minister Patel welcomed the mega-investment, saying it came on a day his government completes a year in power. He further said that it is a testament to political stability and political support along with good governance and excellent infrastructure facilities existing in Gujarat.

Earlier, Maharashtra Opposition Leader and NCP Leader Ajit Pawar wrote to Chief Minister Eknath Shinde alleging that the Vedanta-Foxconn project is likely to have been moved to Gujarat under “political pressure”. In his letter, Pawar asked Shinde to continue efforts to bring the project back to Maharashtra. “This is an effort to financially deprive Maharashtra,” he said.

The Vedanta-Foxconn 60:40 joint venture will establish a semiconductor manufacturing unit, a display manufacturing unit and a semiconductor assembly and test unit on a 1,000-acre site in the Ahmedabad district.

Vedanta controversy

A notice on the Vedanta website invited Expressions of Interest (EOIs) for the sale of Sterlite Copper while listing 10 units, including the primary and secondary smelter complex, a sulfuric acid plant and a copper refinery that were in the block.

“The plant produces 40% of India’s copper demand and contributes around Rs 2.5 billion to the public treasury, 12% of Thoothukudi port revenue, 95% of the sulfuric acid market share in Tamil Nadu, direct employment of 5,000 people and another 25,000 indirectly through the value chain,” Vedanta said in its EOI notice.

Semiconductor chips, or microchips, are essential parts of many digital consumer products, from cars to mobile phones to ATM cards. The Indian semiconductor market was valued at $27.2 billion in 2021 and is expected to grow at a healthy CAGR of almost 19% to reach $64 billion in 2026. But none of these chips is made in India until the moment.

A massive shortage in the semiconductor supply chain last year hit many industries, including electronics and automotive. To reduce dependence on imports from countries such as Taiwan and China, the government introduced a tax incentive scheme for semiconductor manufacturing in the country. Vedanta-Foxconn is one of the successful applicants for the production-linked incentive (PLI) scheme for semiconductors.

Political pressure

“This is the largest investment ever made in Gujarat… ours will be the first semiconductor plant in the country,” Vedanta chairman Anil Agarwal said, adding that local chip manufacturing will make laptops and tablets affordable. Agarwal said the Gujarat unit will make 40,000 wafers (used in making integrated circuits) and 60,000 panels per month to start. Prime Minister Narendra Modi hailed the MoU as one that will boost the economy and create jobs.

“On January 5, 2022, [Vedanta-Foxconn] sent a letter to the Center with a copy to the state [Maharashtra] saying that we want to establish this investment and we are looking at four states including Maharashtra and asking what package will be implemented. you give us

“The people who criticize us had six months to finalize things,” said Samant, defending CM Shinde, who took office on June 30. Samant further added that “there were only meetings [between government officials and Vedanta-Foxconn] in these six months, here and abroad.” “But these people were working on the assumption that this company is not going to come to Maharashtra,” he said, pointing to the MVA coalition.

Samant also said that after taking over as prime minister, Shinde had instructed officials from the industries department to offer the best possible package, adding that MP CM Devendra Fadnavis also met with Anil Agarwal, chairman of Vedanta Resources, to reiterate Maharashtra’s commitment to the project.

2018 protests

The Tamil Nadu Pollution Control Board had given permission for the plant to be established in 1994. However, locals, including fishermen, demanded its closure due to alleged pollution. In 2018, mass protests broke out against the plant over Sterlite’s plan to increase production capacity from 400,000 to 800,000 tons per year.

In February of that year, hundreds of protesters blocked the gate of the plant. After that things got very tense on May 22, 2018, when protesters staged a march against Sterlite. Later, the police resorted to firing tear gas and finally live ammunition. At least 13 protesters were killed and more than 100 were injured.

Controversial history

Foil Vedanta: Once Vedanta was listed in London in 2003, an environmental group called Foil Vedanta targeted it in a sustained campaign and rallies outside its annual meetings in the UK capital.

Odisha’s Niyamgiri Hills: In 2014, Vedanta lost a battle over the bauxite mine in the Niyamgiri Hills of Odisha, which is considered sacred by the Dongria Kondh tribe. The rejection forced the company to import expensive bauxite for an aluminum plant, also in Odisha, and delay its expansion.

Zambia: A 2017 Reuters report said a UK court “dismissed” Vedanta’s “attempt to block” a legal challenge from around 1,800 villagers in Zambia, a large nation located in southern Africa (neighbouring Zimbabwe), “for the alleged contamination of their villages.” According to a report by BusinessToday.in, Vedanta’s appeal is being heard in the Supreme Court of England.

Norway: In 2007, the Norwegian Pension Fund (run by the government) removed Vedanta from its investment portfolio, partly due to environmental problems in India. In 2014, the fund eliminated Vedanta’s then-unit, Sesa Sterlite.

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