 "Question mark hangs over Vedanta's Odisha project")
This has put a question mark on Vedanta's bold gamble to invest Rs 60,000 crore in the aluminium sector in Odisha. Coming after Posco's decision to mothball its integrated steel plant, this is bound to take some sheen off Odisha's reputation as an investment destination.
Will the proposed meeting between Albanese and Patnaik yield any outcome different from the ones Vedanta Chairman Anil Agarwal has had with the chief minister over the last few years with similar requests? The answer is no.
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Even if the past is no indicator of the future, the present scenario leaves little room for the state government to bring succour to Vedanta which has reeled under raw material shortages ever since it went into production in December 2007.
Even if it wants to supply bauxite to the starving plant, the state government has no ready-made solutions. Odisha Steel & Mines Minister Prafulla Mallick says candidly that "the state government is in no position to ensure supply of bauxite to the ailing plant".
The Patnaik government's helplessness stems from the fact that its mining arm, Odisha Mining Corporation, does not own any bauxite deposit (unlike its hold on other important minerals like iron ore and chrome). "We have asked the Centre to reserve two big mines, Kalrapat and Sashubahumali, in favour of Odisha Mining Corporation. If that is done, we can supply bauxite to Vedanta's plant," a senior Odisha government officer says.
Also, after the enactment of the Mines and Mineral Development and Regulation Act, 2015, it has become mandatory for any resource hungry company like Vedanta to come through the auction route to get hold of a mineral deposit. And no bauxite mine figures in the list of mines to be put on the block in the first tranche of auction scheduled to be held by the end of this year.
However, one window of opportunity that is available to Patnaik is to allow Vedanta to source bauxite from the two mines, Sijimali and Kutrumali, which are in the process of being handed over to Larsen & Toubro. The state government has already recommended the case to the Centre and is waiting for its nod.
Vedanta owns 24 per cent in Raykal, the special purpose vehicle, formed to implement the L&T project. Though legal experts have opined in favour of Vedanta drawing raw material from these mines, the state government is cautious on the issue. "The mines are being allotted to L&T for captive use. Under the changed laws and circumstances, the supply of bauxite from these mines to Vedanta may not be possible," says another officer.
Not doing enough?
While the state feels its hands are tied and it cannot help Vedanta secure bauxite for the Lanjigarh plant, particularly after it was denied access to its mine in Niyamgiri on environmental grounds, the company's executives have a different view.
"Immediately after the Niyamgiri fiasco, we had approached the government with a request to allot us alternative mines from among 33 deposits in the vicinity of Lanjigarh. No action was taken on the proposal before the new MMDR Act shut the doors on preferential allotment," says a Vedanta executive.
The government should expedite the process of identifying bauxite mines for auction and reservation of some deposits for Odisha Mining Corporation if it really wants to safeguard investments in alumina/aluminium sector in the state, he adds.
Besides, there is enough scope to overturn the decision on Niyamgiri based on technical grounds, the executive argues. According to him, the gram sabhas had virtually turned out to be a referendum on setting up of the Vedanta project, whereas the Supreme Court mandate on holding the gram sabhas was meant to protect the religious rights of the tribes over the Niyam Raja shrine located 10 km from the mining site and to ensure implementation of tribal rights in the area. Odisha Mining Corporation, which holds the lease for the Niyamgiri deposits, should have taken up the issue with the Centre to regain its mining rights, he adds.
But is the non-availability of bauxite within the state the only reason for Vedanta's decision to shut down the Lanjigarh refinery which has run on imported bauxite for nearly a decade? No, says BS Pani, an aluminium industry analyst. The decision to close the unit is triggered by the sharp fall in the alumina/ aluminium prices in the London Metal Exchange, according to him.
While the global alumina prices hovered around $300 per tonne, the cost of production at Vedanta's Lanjigarh refinery was $340 per tonne, making the plant's operation unviable. "We are incurring a daily loss of Rs 3 crore," says Vedanta Chief Operating Officer KK Dave. The cost of production has increased because the company has to pay Rs 2,500 per tonne towards logistics for imported bauxite and Rs 1,400 per tonne for bauxite sourced from other states within India.
"In this context, lack of captive mine or bauxite within the state has impacted us adversely, whereas, despite the market slump, Nalco and Utkal Alumina (a Hindalco company), which have captive bauxite mines, have managed to keep their refinery afloat because of the money they save on sourcing of bauxite," points out a source in Vedanta.