After years of controversy and confusion, Vedanta's project to mine bauxite on a forested hill considered sacred by an ancient tribe has been stopped by the Indian government.
"There's no emotion, no politics, no prejudice," environment minister Jairam Ramesh said as he announced that Vedanta would not be allowed to mine in the Niyamgiri Hills of the eastern Orissa state. "I have taken this decision purely on a legal approach – laws are being violated."
Trouble seems to be brewing for the UK-listed Vedanta Resources on another front too – its plan to buy oil and gas explorer Cairn India for $9.6bn (£6bn) could face regulatory hurdles and a takeover battle.
Bloomberg and the Press Trust of India reported that not only would the government insist on its approval for the Cairn buyout, but it may also get state energy companies Oil & Natural Gas Corp and Gail, India's largest gas transmission and marketing company, to team up for a counter bid.
The immediate crisis facing Vedanta however, is the setback to its plans for expansion in the aluminium sector.
A government report released last week had accused the group of violations of forest conservation, tribal rights and environmental protection laws in Orissa.
A panel of forestry experts subsequently confirmed the violations and recommended action against Vedanta, so the government's decision was expected, despite last-minute intervention by state chief minister Naveen Patnaik.
Patnaik met prime minister Manmohan Singh to lobby for Vedanta and a steel project by South Korea's Posco.
Vedanta, which wanted to extract bauxite from the tribal forest, for an alumina refinery it has built nearby, required clearance from Delhi under the country's forest and environmental laws. It had provisional environmental clearance , but it failed to clear the final hurdle under laws protecting the forests and granting rights to local tribal groups.
Vedanta was accused of rushing ahead with the mining project without obtaining the consent of the tribal groups, a charge denied by the company.
"Our effort is to bring the poor tribal people into the mainstream," Vedanta Aluminium's chief operating officer, Mukesh Kumar, said.
Vedanta's alumina refinery is sourcing bauxite from other locations in the state, but even here it has been accused of wrongdoing. Eleven of these mines are said to be "illegal", as they lack environmental clearance.
N C Saxena, who headed the government's inquiry committee, was emphatic in his condemnation of Vedanta's mining project.
"Bauxite is mined in other countries too but not like this," he said. "It has to be done in a sustainable manner and no flouting of environment laws should be allowed. And it should not be at the cost of local powerless people. Why should the poorest lose out?"
The main loser in Orissa would have been the Dongria-Kondh tribe which inhabits the upper reaches of the hilly forest. The campaign against the mining project had received widespread national and international support.
"The government has listened to the most powerless people on earth, it very clearly shows that democracy still works in India," said environmental activist Sunita Narain of the Delhi-based Centre for Science and Environment.
"The poor are saying that modern development is not giving them a livelihood," she added. "It's an issue on which the country will have to take very tough decisions. India's biggest constraint to growth is the availability of land and water."
But the long-drawn-out controversy over Vedanta's mining project also reflects Delhi's failure to devise an effective development policy for millions of forest-dwelling tribes in central and eastern India.
"The problem is that in mining projects the rightful stakeholders don't get their share," said Mohan Guruswamy of the independent thinktank Centre for Policy Alternatives.
"The habitat of the tribal peoples is degraded, their livelihoods destroyed and the women exploited. What we need is a constitutional arrangement that ensures the tribal groups have a voice and derive some benefit from development."
The government's refusal to let Vedanta mine bauxite in a forest inhabited by poor tribes is seen as an unprecedented action in India. In the past, big corporations have usually had their way. Ramesh is hailed as the first environment minister who takes his job seriously. But the move is raising hackles not just in industry but among state governments that are keen to back prized projects. India's financial centre, Mumbai, for instance, needs a new airport, but the proposed site doesn't have environmental clearance as the project will destroy 400 acres of mangroves protecting the coast. The Economic Times reports that more than a dozen power projects, including a nuclear power plant and 55 iron ore mines are stalled in a coastal region south of Mumbai due to environmental concerns.
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