On January 8, the proposal for providing the second round of forest clearing for Orissa Mining Corporation (OMC, which has a tie-up with Vedanta Aluminium for supplying Bauxite) was rejected by the environment ministry. OMC had proposed to get the forest cleared for mining ore in Lanjigarh reserve in Kalaihandi as well as Rayagadha districts.
According to the order issued by the environment ministry, 12 village councils of the above mentioned districts had decided unanimously to not allow any kind of mining activity on Niyama Dangars. However, the industry experts are of the view that the rejection from the environment ministry does not end everything for Anil Agarwal’s Vedanta Aluminium that has investments of Rs.50,000 crore in Lanjigarh.
Despite the scarcity of Bauxite ore, the alumina refinery at Lanjigarh still has a total capacity of 60% bauxite, although the refinery had to put their operations on hold for a period of about 7 months last year.
The officials of Vedanta Aluminum were not available for comments on this report. But a company source said, they authority have decided to continue running the alumina refinery at Lanjigarh till they have bauxite supplies from Balco’s mines and some other sources. The company is even hopeful to get bauxite from other sources as well since Odisha is presently working towards a similar objective. The Lanjigarh’s refinery requires about 2-2.5 mt of bauxite, Balco’s mines serves the purpose of about 1.5 mt and rest of the requirements is met by other states like Andhra Pradesh and Gujarat.
According to a source, close to Vedanta Aluminum, the total production cost will pose a challenge. Initially, the company had set up the project in Odisha with the belief that they would source bauxite from Niyamgiri. Due to the unacceptance of the proposal by the ministry, they will have to import alumina that will cost around $360-$370 per tonne.
The alumina that gets processed at Lanjigarh refinery is used mainly by Korba II and Jharsugda I, both owned by Balco. In the first half of 2013, the company kept the production cost of aluminium quite low despite running its aluminum smelters with a third-party alumina feed. This had taken place after the refinery operations at Lanjigarh was suspended. Compared to its cost of production at $1,845 earlier, the company had managed to keep the cost at $1,675 in the first half while the second half was restricted to $1,651. This led to significant improvements in areas such as specific power consumption and several other parameters as far as operation was concerned.
Earlier in November, Naveen Patnaik, the chief minister of Odisha had assured Agarwal to provide his refinery projects with bauxite ore from L&T reserves at Kutrumali and Sijimali mines in Rayagadha and Kalaihandi districts. However, analysts are of a different view. They believe it would at least take 2-3 years for these mines to produce bauxite as they do not have a mining license yet.
