By Nageshwar Patnaik in Bhubaneswar, May 25, 2015 :

A decade after investing Rs 52,000 crore in Odisha – the largest ever by a single corporate house – Anil Agarwal owned Vedanta Limited [VAL] is still groping in dark not knowing where it is heading for.

Regulatory hurdles, lack of access to raw material – bauxite and alumina and land acquisition problems have forced VAL to run its refinery and smelter at one fourth of its capacities.

At 3.3 billion ton, India has the world’s fifth-largest reserve of bauxite, the principle source of aluminium. But tardy government clearances and land acquisition issues mean that most of its alumina refineries including VAL’s one million ton per annum [MTPA] refining capacity at Lanjigarh cannot operate in the absence of captive bauxite mines, leaving capacity idle.

VAL is credited with setting up Asia’s largest single location aluminium complex which has the potential enough to propel Odisha on the global map as a critical and potential aluminium hub. However, the Naveen Patnaik government’s lackadaisical approach in ensuring promised raw-material linkage to run the Lanjigarh refinery and lack of power to begin commercial production in 1.25 MTPA smelter at Jharsuguda has raised alarm bell for VAL.

As per the government’s Aluminium Mission Plan 2010-20, domestic demand for the metal is expected to rise from 1.4 million tonne a year now to 5 million ton by 2015 and 10 million ton by 2020.

Experts, however, say the wall of regulations will make it difficult for aluminium makers to take advantage of this situation.

“India is a placed at advantageous position, but based on present conditions and regulatory embargoes introduced every day, it is doubtful whether the industry will be able to take advantage,” said PK Jena, a mining expert and former director of Council of Industrial and Scientific Research.

Jena said policy changes are a must for the domestic aluminium industry to survive. “Sixty per cent of bauxite deposit in the country is in Odisha. I cannot understand why the state government fails to ensure bauxite linkage to the Companies, which have already invested heavily and come up with the alumna and aluminium complex in the state? He quipped.

VAL chief executive officer, Aluminium, Abhijit Pati, told Bizodisha.com, “Scaling up of our operations to 100% will create nearly one lakh direct and indirect employment opportunities. It will also open up avenues to set up downstream and ancillary industries further increasing employment creation. This will boost the local economy.”

VAL’s Jharsuguda complex houses 1.75 MTPA capacity smelter and 1315 MW capacity Captive Power Plant apart from. But the company is facing difficulty on two aspects. 1.25 MTPA smelting capacity at Jharsuguda is lying idle for lack of desired power supply.

The State Government is yet to allow the company to draw power from Vedanta’s own 2400 MW power plant located at the same site. Under present norms, the company has to pay huge cross-subsidy charges to use this power. This additional cost makes it absolutely unviable for the company to initiate production in the 1.25 MTPA smelter.

Operations of the VAL’s refinery and smelter units at full capacity can be the game changer and yet, these units are languishing due to lack of access to bauxite and alumina despite promise by the state government to ensure raw material linkages to the Company.

“Niyamgiri bauxite deposits are a small but qualitative one. If the state government could not ensure drawing of bauxite from Niyamgiri due to various reasons, it could have allotted deposits abundantly available in the state to Vedanta. But why it is not happening is beyond my comprehension”, Jena remarked.

At full capacity, VAL is expected to contribute Rs. 2,500 crore to the state exchequer in annual taxes and duties as compared to Rs 900 crore at present. Besides, Odisha could emerge as a major aluminium hub in the world.