Odisha Mining Corporation to fast track bauxite mining to rescue Vedanta refinery

In its bid to rescue Vedanta's alumina refinery at Lanjigarh, the Odisha government has put its mining PSU Odisha Mining Corporation (OMC) on the job to start mining from Karlapat mines at the earliest. Timelines have been set to achieve different critical milestones to commence bauxite mining from Karlapat which has 153 million tonne of proven reserve and 54 million tonne probable reserve. OMC aims to start mining activity from the mine from December 2016.

"OMC has already applied for mining lease (ML) on 1800 hectares over Karlapat. The PSU has also set a mining plan of extracting five million tonne per annum of bauxite. The mining plan would soon be sent to the Indian Bureau of Mines (IBM) for approval.", said a senior government official.

The Centre, in March this year, had decided to allocate the Karlapat deposits to the state run miner following a request from the state government to reserve the mines in favour of the PSU. The state government had sought reservation of the bauxite mines for 30 years, arguing that it will ensure fair and equitable distribution of the raw material.

Besides, the government felt such an arrangement will help accrue more economic returns for the state by way of royalty, taxes and dividend, thereby providing more funds for developmental activities.

OMC producing bauxite from Karlapat would also perk up raw material prospects for Vedanta whose Lanjigarh refinery is headed for closure mainly due to high sourcing cost of bauxite. The PSU has an agreement with the Vedanta Group for supplying 150 million tonne of bauxite for the Lanjigarh refinery.

To offer immediate relief to the refinery, the state government had also decided to approach aluminium producers like National Aluminium Company (Nalco) and Aditya Birla Group promoted Hindcalco Industries to arrange interim bauxite supplies.

To run the refinery at full capacity of one million tonne, Vedanta needs 3-3.5 million tonne of good quality bauxite every year. Vedanta has invested INR 4500 crore on the refinery. Running the refinery on externally sourced bauxite had turned out to be economically unviable for Vedanta. The refinery was bleeding losses of INR three crore every day as logistics cost accounted for 35 per cent of total sourcing cost of bauxite.

Alumina production cost from the Lanjigarh refinery stood at $340-350 a tonne compared to the average global market price of $290-300.