– By Dr Shishir Choudhary
The controversial copper industry of Tamil Nadu has been a cornerstone of Gujarat’s economic prosperity, exemplified by Hindalco Industries’ Dahej smelter serving as a nucleus of employment for over 10,000 individuals and indirectly fostering an additional 50,000 jobs in related sectors. Gujarat’s emergence as a major exporter of copper products, contributing over Rs 30,000 crore in exports in 2022-23, has not only bolstered the state’s economic standing but has also played a pivotal role in maintaining a favorable balance of trade. Gujarat’s economy today stands around Rs 26,33 lakh crore, according to the Vibrant Gujarat Global Summit.
The substantial tax contribution, exemplified by Hindalco Industries alone paying over Rs 1,000 crore in taxes during the fiscal year 2022-23, forms a crucial lifeline for the Gujarat government. These revenues facilitate the funding of public services, infrastructure projects, and further economic development, establishing a robust economic ecosystem.
Beyond the economic realm, copper smelters like the one in Dahej have been instrumental in fostering industrial development. The creation of the Dahej Special Economic Zone stands as a testament to how the copper industry can catalyze the formation of major industrial hubs, underscoring the multifaceted impact of copper production on regional development.
However, against this backdrop of prosperity in Gujarat, the closure of Sterlite Copper in Tamil Nadu tells a starkly different tale. The abrupt shuttering of the plant has resulted in a ripple effect, causing significant repercussions for the state’s economy.
Foremost among these repercussions is the impact on employment, with both direct and indirect opportunities taking a hit. Thousands directly associated with Sterlite Copper faced unemployment, and ancillary sectors such as transportation and services experienced a ripple of job losses.
The economic downturn in Tamil Nadu is palpable, marked by a decline in industrial production and export revenue. The once-thriving copper product exports have dwindled, causing a substantial loss in foreign exchange earnings and disrupting the state’s overall trade equilibrium. The plant was once on the way to becoming the largest single location smelter.
Investors, once optimistic about Tamil Nadu’s industrial climate, now face uncertainty. The closure of Sterlite Copper has raised doubts about regulatory stability and the broader business environment, potentially deterring future investments and hindering the state’s economic rejuvenation. The state’s GDP is Rs 6.64 lakh crore, according to Tamil Nadu’s Global Investor Meet 2024.
Tax revenues, a critical source for public services and development projects, have dwindled, adding financial strain to the Tamil Nadu government. Reduced corporate taxes following the plant’s closure have posed challenges in meeting the state’s fiscal commitments.
The social fabric of local communities has also been torn asunder. Those reliant on Sterlite Copper for livelihoods and support services now grapple with the social fallout of the closure.
In the grand tapestry of economic development, the divergent narratives of Gujarat’s prosperity and Tamil Nadu’s challenges underscore the delicate balance policymakers must strike. Bridging the gap between industrial growth and environmental concerns remains a complex task, demanding nuanced strategies that safeguard economic interests without compromising the well-being of communities and the environment. As these contrasting tales unfold, they serve as a stark reminder of the intricate dance between progress and its consequences.
Adding to this narrative, the Adani Group’s endeavour to establish the world’s largest copper manufacturing plant in Gujarat further tilts the scales in favour of the state’s economic ascendancy. This ambitious project, set to propel Gujarat to newer economic heights, has garnered attention for the seemingly smoother path it navigated in securing environmental clearances.
Despite Sterlite Copper’s implementation of state-of-the-art technologies to ensure environmental compliance, the project faced rigorous scrutiny. The dichotomy between Sterlite Copper’s fate and Adani’s smoother path underscores the complexity of the regulatory landscape and the challenges faced by industries striving for growth within the bounds of environmental sustainability.
The stark contrast in environmental clearance processes becomes more pronounced when considering Sterlite Copper’s expansion plans. Despite obtaining all necessary approvals, the expansion was thwarted by protests and opposition, leading to an unceremonious rejection. In contrast, Gujarat is set to welcome a colossal 1 million metric tons of copper manufacturing capacity from Adani Group without similar hurdles.
This juxtaposition of contrasting circumstances underscores the potential disparity in the economic trajectories of Gujarat and Tamil Nadu in the copper industry. Gujarat, with its burgeoning copper industry and Adani’s ambitious plans, appears to be on an upward trajectory, while Tamil Nadu grapples with the aftermath of Sterlite Copper’s closure.
As the copper industry narrative unfolds, it not only showcases the economic dynamics at play but also raises critical questions about regulatory frameworks, environmental considerations, and the balancing act required for sustainable industrial growth. The tale of two states serves as a microcosm of the challenges and opportunities inherent in fostering economic development while ensuring environmental responsibility.
(Dr Shishir Choudhary is the Economist & Retired HoD, Economics Department, at St. Xavier’s College, Ranchi.)
(Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)