Vedanta plans set back by tribal rights commission

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Plans by Vedanta Resources to build a bauxite mine in the Indian state of Orissa were dealt a new blow yesterday when a government-appointed panel advised against the project.

The Saxena panel was appointed by New Delhi to investigate claims that the mining giant's proposed excavations in the Niyamgiri hills would destroy the lifestyle of the Dongria Kondh tribe. The panel concluded : "Allowing mining in the proposed mining lease area by depriving two primitive tribal groups of their rights ... in order to benefit a private company would shake the faith of the tribals in the law of the land."

Permitting the mine might also have serious security implications, it added, referring to a Maoist group which is seeking to draw support from among the tribal peoples. The Indian government is expected to make its decision by the end of the month.

Environmental organisations have argued that London-listed Vedanta habitually ignores the plight of local tribes and the environment. But Vedanta claimed few Dongria Kondh lived in the area of its planned mine and pointed to a previous supreme court decision, which backed the proposal. The company's executive chairman and majority shareholder, Anil Agarwal, said he would "study the report".

The human rights group Survival International welcomed the report, urging Indian officials to accept the committee's findings. Its director, Stephen Corry, said: "This report is utterly scathing about Vedanta's behaviour. Let's hope this is the final nail in the coffin for Vedanta's plans."

The panel's advice was published as Vedanta confirmed it would spend as much as $9.6bn (£6.1bn) buying up to 60 per cent of the oil producer Cairn India. The move into oil represents a shift for Vedanta, making it one of only two major mining companies with significant oil interests, alongside BHP Billiton.