Vedanta despairing about aluminium investment in India

Leading metal makers such as ArcelorMittal and Vedanta will be keen on more work in India but for the dispiriting project delays, especially those pertaining to sanctions for mines. In an interview with Bloomberg TV, Vedanta Chairman Anil Agarwal regretted his $8-billion investment in the country's largest single-location aluminium complex in Odisha. Agarwal said he had the choice of either building the complex in Odisha or acquiring the US owned, Mexican copper producer Asarco.

Factors in favour of Odisha are availability of high-quality bauxite and coal to run power plants linked to the smelter. But what remains highly debilitating for the one-million-tonne (mt) alumina refinery at Lanjigarh is Vedanta's inability to procure bauxite from Odisha, after its attempts to open mines in Niyamgiri Hills ended in a fiasco. Also, it didn't see success in its attempt to buy alumina from National Aluminium Company (Nalco).

Starved of bauxite, the Vedanta refinery remained shut for about seven months earlier this year. Vedanta Aluminium Managing Director Sushil Roongta has said Vedanta imported bauxite from Indonesia, and this cost the company about five times the price supplies from Odisha would entail. India importing bauxite is indefensible, as the country has the world's fifth-largest bauxite deposits of about three billion tonnes. Bauxite procured from multiple sources is, at no point, adequate to run the Lanjigarh refinery at full capacity. As a result, alumina-production costs have soared.

Agarwal's frustration is understandable, as under the normal circumstances of bauxite coming from Odisha mines, the Vedanta refinery will figure among the lowest-cost quartile plants globally. Supplies from Nalco are ruled out, as its chairman Ansuman Das is committed to using alumina for its own use and, subsequently, exporting the surplus.

It should not be lost on the government that what Vedanta has done so far is only part of its plan for refinery and smelter capacity-building in Odisha. Given an uninterrupted supply of bauxite from within the state, preferably from captive mines, Vedanta will see its refinery capacity rise to five mt and the smelter capacity at Jharsuguda from 500,000 tonnes to 1.6 mt. The bauxite supply problem apart, aluminium prices on London Metal Exchange (LME) staying stubbornly low, leaving as much a third of the world aluminium industry in the red, might be leading Agarwal to think instead of aluminium, he should have furthered Vedanta's cause in the copper space. The group owns a 400,000-tonne copper smelter in Tuticorin, and the capacity is to be doubled in the next two years. Acquisition of Asarco would have made Vedanta a world leader in copper.