Vedanta hopeful of nod for 50% ramp up in capacity at Lanjigarh refinery

Vedanta is looking at the possibility of expanding its alumina refinery capacity at Lanjigarh beyond the existing limit of four million tonne per annum (mtpa). The refinery's rated capacity is six mtpa and Vedanta expects to get all clearances to operate it at that level by 2020.

Presently, the de-bottlenecked capacity at the Lanjigarh refinery is 1.7-2 mtpa.

“We are hopeful of receiving all approvals for expanding the Lanjigarh refinery's production capacity to six mtpa by 2020. But to operate the refinery at that capacity, a lot will depend on availability of local bauxite sources. We are evaluating options like tying up local bauxite sourcing arrangements and participating in auctions of bauxite assets. Availability of local bauxite would be the key factor since we are incurring a huge logistics cost in transportation”, said a senior company executive.

Vedanta began second stream operations at the Lanjigarh refinery in April last year. The ramp up to the 4-mtpa unit would be done on improved visibility of local bauxite sources.

Though the Vedanta Group has considered delay in tying up local bauxite sources as an indication of impairment, it has concluded against such linkage since the recoverable amount of the asset exceeded its carrying amount. Vedanta is pinning its hopes on the Odisha government to arrange local bauxite, besides wanting to receive support through tie-ups with external suppliers.

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The company has entered into agreements with various suppliers internationally and domestically to ensure the availability of bauxite to run its refinery. 

Earlier in March, the company said that Vedanta planned to purchase bauxite from third party suppliers until the time when the mineral resource could be sourced from its own mines.

During 2016-17, the Lanjigarh refinery produced 1.2 million tonnes of bauxite, thereby, registering a growth of 24 per cent. The company plans to continue double streaming operations to support the aluminium pot ramp-ups with de-bottlenecked capacity of 1.7-2.0 million tonne per annum in FY18 as well. Bauxite will be mainly derived from multiple mines at Bharat Aluminium Company (Balco) and the balance will be met from laterite mines, other domestic sources and imports.

In FY17, Vedanta's total bauxite requirement was pegged at 3.4 million tonnes. Captive mines contributed 31 per cent to this requirement and the company arranged 23 per cent from domestic sources. Imports accounted for the remaining 46 per cent of requirement.