The Andhra Pradesh state government in India is considering acquiring the Ras-Al-Khaimah Investment Authority’s (Rakia’s) stake in Anrak Aluminium joint venture. This is an effort to settle the dispute after several years under international arbitration.
However, the state government lately commissioned a committee of senior officials headed by its mining secretary Gopala Krishna Dwivedi to prospect multiple options to settle the arbitration proceedings by Rakia against India.
The other options being scouted include refunding of Rakia’s investment through the Andhra Pradesh Mineral Development Corporation (APMDC), facilitating bauxite supplies to Anrak’s Alumina refinery project, or an ‘out of court’ settlement with the UAE entity.
A senior official in the state’s mines and geology ministry, said: “A six-member committee of senior officials was constituted following the decision by an inter-ministerial group that had decided in a November 19 meeting to work out various possible alternatives to resolve the issue of international arbitration raised by Rakia.”
The official also added: “The central government had nominated the Dr Veena Kumari Dermal, joint secretary in the Union Ministry of Mines, to the panel.”
The state of Andhra Pradesh is estimated to have over 600 million tonnes of bauxite reserves in the Eastern Ghats, which accounts for nearly 22% of India’s bauxite reserves and second only to neighbouring state Odisha, which is estimated to possess over 2,000 million tonnes. Indian aluminium giants like Nalco and Hindalco mine bauxite in Odisha. Undivided Andhra Pradesh had signed a government-to-government (G2G) agreement with the UAE’s state-owned entity in 2007.
The then government delivered assurance towards the supply of bauxite from APMDC to the joint venture, which had proposed setting up an alumina refinery plant and smelter involving an investment of around INR 6,000 crore, as well as to alumina refinery of Jindal’s South West Aluminium project.
The state government which came to power in 2014 nullified the bauxite supply agreements with these two entities.
Now present Chief Minister of the residual Andhra Pradesh from which Telangana state was carved out in June 2014.
The moment the government cancelled the agreement, Rakia served an arbitration notice on the Indian government and the AP government, appealing either fulfilment of the commitment to supply bauxite or pay compensatory damages on its investment of $44.71 million.
While responding to the notice, India’s mines ministry highlighted that the dispute did not fall under the purview of the India-UAE bilateral investment promotion and protection agreement and advised to resolve it under Indian laws.
Anrak had invested around INR 5,712 crore towards erecting the aluminium manufacturing facility that was to be ready March 2013, wherein the promoters had brought in around INR 1,700 crore, and a consortium of 23 banks led by State Bank of India had extended loans of around INR 4,000 crore.
Anrak Aluminium also faced the threat of the Corporate Insolvency Resolution Process (CIRP) when India’s largest state-owned lender, SBI, moved the National Company Law Tribunal seeking CIRP proceedings.
As there was no supply of the key raw material for the project, the aluminium joint venture had defaulted on around INR 3,242 crore of loans and $96 million of external commercial borrowings to the SBI-led lenders’ consortium.
Although, SBI pulled out its CIRP petition following the directives of the High Court that heard a plea by Anrak challenging the CIRP petition of SBI before the NCLT.
The NCLT directed the company and its lenders in October 2018, to explore the possibility of starting commercial operations instead of looking to wind up and liquidate the assets.
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