Mining and metals major Vedanta Limited has received a significant setback after the Odisha government issued a demand notice worth over ₹1,255 crore to its subsidiary ESL Steel Limited. The notice, linked to alleged mining-related shortfalls, has heightened concerns among investors and market watchers.

Why Has the Odisha Government Issued This Notice?

The demand originates from the Koira Circle in Keonjhar district, Odisha, where the office of the Deputy Director of Mines issued two separate demand notices to ESL Steel. Together, these notices amount to ₹12,55,37,61,591, or approximately ₹1,255 crore.

According to the state government, the company failed to meet certain obligations linked to its mining leases. The alleged violations fall under Rule 12(A) of the Minerals Concession Rules, 2016, which governs minimum production and dispatch requirements for mining leaseholders.

Allegations of Production Shortfall

Under mining agreements, companies are required to extract and dispatch a minimum quantity of minerals every year. If they fail to meet these targets, they are liable to pay compensation or a penalty for the shortfall.

The Odisha government claims that ESL Steel did not achieve the mandated production and dispatch levels, leading to the issuance of this large demand.

Which Mining Leases Are Involved?

The dispute relates to two mining leases operated by ESL Steel:

• BICO Mine

• Feegrade Mine

A Mine Development and Production Agreement (MDPA) was signed between the company and the Odisha government on November 15, 2021. As per the government’s notice, ESL Steel allegedly failed to meet production targets during the fourth year of operations under this agreement.

Company’s Response: Legal Challenge Planned

ESL Steel has strongly contested the demand. In a regulatory filing, the company stated that it disagrees with both the basis of the notice and the method used to calculate the amount. According to the company, the demand is legally and factually unsustainable.

The firm has clarified that it is reviewing the notice in detail and intends to pursue all available legal remedies. This includes approaching the appropriate court to seek a stay on the demand and attempting to have the notices quashed.

Market Reaction

Despite the development, shares of Vedanta Limited closed 0.78 percent higher at ₹681.05 in the latest trading session, indicating that investors are closely watching how the legal process unfolds.

What This Means Going Forward

This case could have significant financial and operational implications, depending on how the legal challenge proceeds. If upheld, the demand would represent a major liability for the Vedanta group. If overturned, it could set an important precedent for how mining shortfall penalties are interpreted and enforced.