In a major setback to the UK based Vedanta, Government has rejected environment clearance to its USD 1.7 billion bauxite mining project proposed in Orissa citing serious violation of forest and environment laws.

“There has been a very serious violation of Environment Protection Act, Forest Conservation and Rights Acts by the Orissa Government and Vedanta’s bauxite mining in the Niyamgiri Hills,” Environment Minister Jairam Ramesh told reporters in New Delhi on Tuesday.

Therefore the stage II forest clearance for the State-owned Orissa Mining Corporation (OMC) and Sterlite Bauxite mining project on the Niyamgiri Hills in Lanjigarh, Kalahandi and Rayagadha districts of the state cannot be granted, he said.

“It stands rejected,” Ramesh said while accepting the recommendation of Forest Advisory Committee (FAC) seeking withdrawal of forest and environment clearance respectively to the state government as well the Vedanta mining project.

In Bhubaneshwar, Orissa’s Industries and Steel and Mines Minister Raghuanth Mohanty termed the decision as “extremely unfortunate”.

“Having given in-principle environment clearance to the project long ago, the Union Environment and Forest Ministry has now all of a sudden announced its decision to reject the Stage-II clearance in an improper and inappropriate manner,”, he told reporters.

The stalling of the project has come at a time when Vedanta Resources is facing legal trouble in its bid for control of Cairn India, a potential deal valued at USD 9.6 billion that will push its stake in the oil market.

Dismissing reports that rejection was a sort of deal in lieu of clearance to the Korean steel giant Posco’s proposed Rs 54,000-crore project in the state, Ramesh said that the two cannot be equated as the violations of forest dwellers by the latter at the site were also being investigated.

“There has been no emotions and no politics and no prejudice involved in the Vedanta’s case…The decision is purely on the basis of the proper legal approach,” which he said was based on the Saxena panel report, Auditor General’s (AG) report and recommendations of the FAC.

Ramesh said just because his ministry had given in-principle approval to the project in 2007, it cannot be a fait accompli.

Vedanta had contended that the environment ministry had given in principle approval to its project in 2007.

“Various violations by Vedanta appear to be too egregious to be glossed over. Furthermore, a mass of new and incriminating evidence has come to light since the Supreme Court delivered its judgement in August 2008,” he pointed out.

In a move that is likely to make the things more difficult for Vedanta, Ramesh said a show-cause notice has also been issued to it as to why the clearance for the one million tonnes per annum alumina refinery at Lanjigarh in Orissa should not be cancelled in view of gross violation of environment norms.

The FAC in its report submitted to Ramesh on Monday had agreed on most of the recommendations of the Saxena panel seeking ban on the mining project in Orissa’s Niyamgiri Hills in view of various violations at the site “which would shake the faith of the tribals.”

The Saxena report has cited many violations of the in-principle environment clearance given to OMC in 2008 including non-compliance with the provisions of the Forest Rights Act.

“The consent certificate of the gram sabha was fake,” the panel said in its report while recommending not to approve the project because of large scale violations.

The panel has also recommended action against Vedanta Alumina Refinery at Lanjigarh saying that it has illegally encroached 26 hectares of forest land.

“This despite the fact that the environmental clearance was given on the condition that no forest land would be used,” the panel said.

Ramesh said the Orissa government had violated the Forest Rights Act and Vedanata Resources violated the Environment Protection Act (EPA).

“We are examining what action has to be taken against the project proponents for violation of various laws including the EPA,” he said even as his ministry has suspended the term of reference and the appraisal process for the Vedanta’s refinery expansion at the site.

He, however, made it clear that his Ministry was not getting into any “witch-hunt”.

Ramesh said he has no prejudices against the Orissa government as his Ministry has cleared an important irrigation project in the state for which the in-principle approval was accorded on Monday.

“While rejecting this (Vedanta) project, I have also cleared an important irrigation project in the state in which over 1500 hectares of forest land is involved,” the minister said.