Last week, a report commissioned by the ministry said allowing mining in the area would deprive two ancient tribes of their rights.
Vedanta’s plans to extract bauxite from a hill revered by a tribal community have caused controversy.
A four-member panel, which investigated alleged violations of environmental laws by Vedanta in Orissa's Kalahandi district, gave its report to the ministry last week.
It said that allowing mining in the area would deprive two tribal groups - the Kutia and Dongria Kondh - of their rights over the site for the benefit of a private company.
It said that would ‘shake the faith’ of tribal people in the laws of the land.
The report concluded that the mine would destroy some 7km2 of forest land and threaten the villagers' survival.
The Dongria Kondh say the mining project will destroy a major part of the Niyamgiri hill, which they consider sacred and a source of livelihood.