Vedanta resumes iron-ore working but founder's problems continue

Indian investigators launch new inquiry into tycoon Anil Agarwal's takeover of 26 per cent stake in Hindustan Zinc in

The controversial FTSE 100 mining company Vedanta resumed its iron ore operations in India's southern Karnataka state yesterday after an industrywide corruption scandal partly abated.

However, elsewhere in India, the company and its billionaire founder, Anil Agarwal, continue to be mired in difficulties.

Vedanta is better known for the controversy over its project in the Niyamgiri Hills, in the eastern Indian state of Odisha, where its plan to mine bauxite was blocked, at least for now, by local tribes who deem the hills sacred.

But also, its Sesa Sterlite subsidiary has been fighting corruption allegations in Karnataka, a region so rife in corruption that one report by a former supreme court judge into the mining industry there claimed: "Huge bribes were paid. Mafia-type operations were the routine practice of the day."

Senior politicians and industry executives were said to be exploiting the rush to mine, with bribery, illicit permits and forged exports said to be widespread.

More than 100 companies were also named in that report, of which Sesa Sterlite was one. A spokesman said Vedanta and Sesa Sterlite strenuously deny the allegations against their operations.

But in 2011 a blanket ban was imposed on all mining work in the region until corruption was cleaned up. India's supreme court in April relaxed the blanket ban, allowing work to resume on 63 mines but cancelling the licences of a further 49 due to the serious nature of their operators' infractions.

Yesterday, Sesa Sterlite said it had been granted permission to resume its work and had done so. But for Mr Agarwal, the company's troubles in India are far from over.

While there remains the possibility that its Niyamgiri Hills project could eventually get the go-ahead, India's Central Bureau of Investigation has just launched a major probe into his 2002 takeover of the state's 26 per cent holding in another company, Hindustan Zinc.

That deal, too, was run through Sesa Sterlite and the investigators are examining how it was that the privatisation took place without parliamentary approval.

The inquiries into Vedanta and Mr Agarwal are not without their critics. Many in India say it must open up more to investment in its mining industry in order to create much-needed wealth for the country. Attacking current investors would only drive new revenues away, they say.

Such threats to invest elsewhere are already widespread. Mr Agarwal told last month of his "regret" that he had invested $8bn (£4.8bn) in an aluminium operation in the state of Odisha only to find there was not enough raw material for it to process. He said he wished he had spent the money buying a US company instead.

The Hindustan Zinc investigation is the third into a major mining deal led by a billionaire investor in six months.

One of those, Kumar Birla, has said he would now seek investments overseas, saying earlier this year: "The country risk for India just now is pretty elevated and chances are that for deployment of capital, you would look to see if there is an asset overseas." He is being investigated over his role in the handing over of a coal mine in 2005.

In the meantime, investors argue the government clampdown is putting at risk efforts to get $160bn of stalled projects moving.