In a big blow to Vedanta Resources, the union government today refused to give environment clearance to its $1.7 billion bauxite mining project in Orissa.

Giving reasons for the decision, union minister of state for environment and forests Jairam Ramesh told reporters in New Delhi that "There has been a very serious violation of Environment Protection Act, Forest Conservation Act and the Forest Rights Act.

There have been no emotions and no politics and no prejudice involved in this report. I have taken this decision in a proper legal approach."

"Forest clearance for the project in the Niyamgiri Hills has been cancelled and there shall be penal action against Vedanta for violating laws. A notice has also been issued to the company for its alumina refinery in Lanjigarh, for increasing its capacity from 1 million to 6 million tonnes illegally."

This area in Western Orissa's Kalahandi district is home to the Dongria Kondh, a primitive tribal community, that has been objecting to Vedanta's plans to set up a bauxite mining project worth Rs5,000 crore.

The London-listed Vedanta is promoted by Anil Agarwal, and operates in India through its subsidiary Sterlite India.

Some believe that Congress leader Rahul Gandhi may be influencing government policy on this project - he's due to visit the area on 26 August. In March 2008, he visited the area and promised his support to the Dongria Kondh tribals.

Vedanta had offered in its defence the promise that it plans to mine only 3.5 sq km of the 250-km Niyamgiri Range. The company also says that there is considerable local support for the project: 5,000 locals helped to build its alumina refinery. In Vedanta's estimate, its mine will bring Rs1,000 crore to the region every year, and will provide jobs for 600,000 locals.

But Ramesh said that his decision was based on the report of the Forest Advisory Committee. The FAC, a statutory body under the Forest Conservation Act, had recommended on Monday that the "in principle" clearance for mining in the Niyamgiri hills be temporarily withdrawn.

Ramesh met with Orissa chief minister Naveen Patnaik on Monday, after which he said he will convey his official decision today. Strangely, he added that he did not discuss the project with Patnaik.

The FAC also said investigations should be launched into violations by Vedanta's aluminium refinery. The FAC, which clears proposals for forest land diversions, gave the recommendations after four days of deliberations over the N C Saxena committee report on the Vedanta case.

Last week, the N C Saxena Committee set up by the government had said that the project should not be allowed. The committee said that the Vedanta project endangers nearly 7,500sq km of forest land, and that it violates tribal forest rights.

The committee was critical of the Orissa government's decision to clear the project; its report stated that government officials colluded with Vedanta to allow blatant and widespread violations of forest and environmental laws.

Vedanta, the Saxena Committee states, has illegally occupied at least 26 hectares of village forest land within its refinery, set up at the base of the Niyamgiri hill.

In deciding on the Orissa Mining Corporation's proposal to mine bauxite for the aluminium giant, the FAC did not go so far as to ask for an absolute rejection of the proposal to mine the sacred hills of Dongria Kond primitive tribal group.

But significantly, it said, "There is compelling and significant prima facie evidence of violations of Forest Rights Act, Forest Conservation Act and Environment Protection Act. Any clearance would be in violation of these acts."

The committee took into consideration the Saxena committee report as well as other evidence and reports to conclude that there had not been adequate and satisfactory compliance with processes of identifying forest dwellers' rights.

The FAC pointed out that the administration in the two districts where the project falls had even ignored the circular of the state government laying down the process of identifying rights under FRA. They agreed with the Saxena panel that there was no serious intent to initiate the process of FRA even after the chief secretary was informed of the lacunae.

The report noted that even the chief secretary had claimed that FRA did not apply to the Vedanta mining site - a violation of the Orissa circular as well as FRA. The MoEF panel has recommended that the ministry should give the state government an opportunity to give its side of the story on these violations.

The FAC report notes that Vedanta had in violation of the Forest Conservation Act illegally occupied 26.123 hectares of village forest land. Vedanta continues to illegally occupy another 85 hectares of forest land under its refinery.

As far back as 2003, the company had misinformed the union government in order to secure environmental clearance for the refinery and ever since has held this government property, with the state government turning a blind eye to it.

It had then argued that it would be incorrect for the Orissa government to claim that these primitive tribes have no claims or rights under the Forest Rights Act, 2006. The affected groups, Dongaria Kondh and Kutia Kondh, are both Scheduled Tribes. The Constitution requires that the government respect and uphold the land rights of the Scheduled Tribes.

Additionally, both the Dongaria Kondh and Kutia Kondh have been notified as primitive tribal groups and are, therefore, eligible for special protection. The Niyamgiri Hills are the sole habitat of the two tribes and at least 20 per ceent of the Dongaria Kondh population lives in villages in and around the forest blocks of the proposed mining project area.

The FAC also agreed with the Saxena panel that the refinery being built to produce 6 million tonnes per annum of aluminium had permission for merely 1 million tonnes per annum.

Going beyond the Saxena panel's findings, FAC also recorded that the refinery was already sourcing bauxite from 14 other mines out of which 11 don't have proper clearance, and the Niyamgiri hills would provide less than 7 per cent of the ore required for the overbuilt plant.

The FAC has also recommended action against Vedanta's alumina refinery at Lanjigarh, at the base of the Niyamgiri Hills, for violating environment laws. It said that steps be taken against the refinery for illegally encroaching and enclosing 26 hectares of forest land, despite the fact that the environmental clearance was given on the condition that no forest land would be used.

The London-listed Vedanta, through its subsidiary Sterlite India, has a joint venture agreement with Orissa Mining Corporation to mine the Niyamgiri Hills for bauxite.

Vedanta and Sterlite have a well-documented record of trampling over environmental and tribal concerns, and then relying on the courts to get their projects cleared, an environmentalist said.