India mines ministry gives its nod to increase Odisha’s bauxite mining lease area

The Ministry of Mines (India) has given its consent to increase the lease area for mining of the mineral from 10 sq. km to 50 sq. km. in the state of Odisha. This is expected to bring economies of scale and increase production of bauxite in the country.

Deepak Kumar Mohanty, director of mines, government of Odisha said in a recent interview, “We had written to the mines ministry (in the first week of February) seeking its approval for increasing the cap for prospecting-mining-cum-mining-lease and mining lease, which has been allowed.”

Bauxite is a raw material used for production of aluminium with Odisha accounting for 60 per cent of India’s estimated bauxite reserves of 593 million tonnes (MT). Odisha is also the largest bauxite producer and accounted for 35.24 per cent, or 7.64 MT, of the country’s 21.67 MT production in FY2013-14. The other bauxite producing states include Gujarat, Jharkhand and Maharashtra. India’s production of bauxite stood at 20.2 MT in FY2014-15 valued at INR 950.42 crore.

“Bauxite supplies have been a key constraint for several large players and they have had to depend upon smaller players with existing licenses to secure supplies. Large number of smaller deposits may be cumbersome to operate and may not favour economies of scale and modern technologies,” said Dipesh Dipu, partner, Jenissi Management Consultants, a consultancy focusing on energy and resources.

Dipu added that it is indeed better to award larger areas under a license as there is a potent market and the government may also benefit through better realisation of values.

India, the world’s second-largest aluminium producer, produced 3.96 MT in 2014-15, which was lower than China’s 21.48 MT. India is the third-largest aluminium consuming country with a consumption of 3.8 MT in 2014-15, lower only to that of China's 22.09 MT and the US’ 5.5 MT.

The move has been welcomed by Nalco, which operates an alumina plant at Damanjodi in Odisha and an aluminium smelting complex at Angul.

A spokesperson for Vedanta Ltd said that the government will now be able to auction bigger area for mining.

“However, it (the move to increase mining area) does not have any effect on Vedanta at present since we do not have any bauxite mines,” he added.