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Soon after the closure of its bauxite-starved one-million tonne (mt) alumina refinery at Lanjigarh, an official of Vedanta Aluminium was asked whether the company would consider moving the plant out of Odisha in case the raw material deadlock was not broken. Not an outrageous question by any means. Denied mine development at the 90 mt bauxite deposit in the Niyamgiri hills because of cancellation of stage-two environment clearance in August 2010 by the central ministry of environment and forests and incessant protests by the local Dongria Kondh tribals, the company, for whatever reasons, was not bailed out by state-owned Odisha Mining Corporation organising supply from its own sources. This is despite an earlier understanding. Vedanta ran the refinery as long as it could, braving severe logistical challenges in getting bauxite from wherever possible, at high cost. Refinery operations were finally suspended on December 5, 2012.
Undaunted, the Vedanta official said, "If an aluminium complex can be run in Odisha, then you don't stand a chance anywhere else in the country. This is the only state which is richly endowed with both bauxite and non-coking coal." Has Vedanta finally got a reason to see light at the end of the tunnel in the wake of the Supreme Court ruling on bauxite mining in Niyamgiri? The court order says clearances to the mine venture would be subject to gram sabhas deciding cultural and religious claims of the tribes and forest dwellers of Kalahandi and Rayagada districts. Odisha Mining Corporation Chairman Saswat Mishra is on record saying, "This is a positive order. The apex court judgment has sorted out most allegations levelled against the project in the past... The order is a step closer for doing mining at Niyamgiri hills but it is too premature to think mining can begin soon."
So, the agony of Vedanta refinery, which is to be expanded to five mt, subject to sorting out regulatory issues, is not going to end too soon unless, of course, the state starts feeding the plant with bauxite from its own sources. Is it not time, the state started considering giving Vedanta access to small deposits in non-forest areas and also mines that have remained closed? London Stock Exchange-listed Vedanta Resources of which Vedanta Aluminium is an associate, says it is largely because of the Lanjigarh refinery setback that the group's alumina production during 2012-13 was down 43 per cent to 527,000 tonnes. In the absence of supply from Lanjigarh refinery, Vedanta perforce has to get the intermediate raw material alumina from multiple sources to keep the 500,000-tonne smelter at Jharsuguda running. But there is a big extra cost involved in sourcing alumina from different parts of the country. The reason why India is seen as a highly cost-effective aluminium production centre is because it facilitates fully integrated operations from bauxite mining to alumina refining to metal smelting backed by low-cost coal fired power. All aluminium cost calculations for Vedanta have, however, gone haywire because of the Lanjigarh refinery impasse.
The long staying ordeal notwithstanding, Vedanta Aluminium Managing Director Sushil Roongta remains firm in his belief that India, sitting on bauxite resources of 3.5 billion tonnes (bt) and non-coking coal resources of 293 bt, has all the potential to become the world's second largest aluminium producer after China. In 2012, of the world primary aluminium production of 47.388 mt, China alone had a share of 21.671 mt. India's production last year in comparison was 1.714 mt. Russia, with production of 4.026 mt, Canada with 2.781 mt, the US with 2.07 mt and UAE with 1.814 mt are ahead of us in producing nations' table. No doubt, India could have made much faster progress in growing aluminium capacity had it not been for enormous delays in getting allocations of bauxite and coal deposits and securing environmental and forest clearances. Unarguably, the project which suffered maximum delays is Utkal Alumina's 1.5-mt alumina refinery in Odisha's Rayagad district. The original promoters Norsk Hydro and Alcan (now part of Rio Tinto) quit the project citing frustratingly long delays. The project is now almost ready for commissioning, thanks to Hindalco playing the rescue act.
For identical reasons, Dubai Aluminium sold its 24.5 per cent ownership of Raykal Aluminium to Vedanta. Raykal Aluminium of which the principal promoter is Larsen & Toubro got prospecting rights over nearly 280 mt of bauxite deposits at Sijmali and Kurumali in Rayagad and Kalahandi districts of Odisha as long back as in 1993. With Vedanta coming on board, chances of renewal of prospecting rights and their finally becoming licences have considerably improved. The Indian process is so slow that even if the mines at Sijmali and Kurumali finally become operational, it will not be before some years. "We have got to keep faith with Odisha to grow our aluminium industry. The state alone has bauxite resources of 1.81 bt and coal resources of 71.45 bt," says Roongta. While Vedanta will finally have 1.75 mt of aluminium smelting capacity in Odisha, NALCO should have a capacity of 1.067 mt in the state. In the coming years, Hindalco will have total capacity to smelt 1.7 mt of aluminium with Odisha figuring prominently in that.
