Even as mining entity Vedanta looks at entering into a long-term contract with Odisha Mining Corporation (OMC) to secure bauxite for its Lanjigarh (Kalahandi district) alumina refinery from the latter’s newly opened Kodingamali mines, the company is worried about escalation in the cost of procuring the raw material.Unlike the Niyamgiri bauxite deposits, located close to the Lanjigarh plant, which was denied to the company after protests by locals and ecology activists, Kodingamali is 130 km away. There being no direct rail link with the mining site, the transportation cost, whether via an indirect rail route or by road, is estimated at Rs 1,000-1,200 a tonne. This could push the bauxite price by more than 100 per cent by the time it reaches the Lanjigarh plant. “Logistics is an issue. In a competitive market, when companies like Nalco and Hindalco have refineries next to their captive mines, and have the advantage of carrying bauxite to their plants at negligible cost through a conveyer system, paying higher cost to haul bauxite from a distance to our plant makes a big difference,” said a senior official of Vedanta. Vedanta had built the alumina refinery at Lanjigarh, on the foothills of Niyamgiri, with the hope of bauxite from the hilltop at minimal cost through a conveyer system — a model which has made Nalco (Natinal Aluminium) one of the lowest cost producers of alumina in the world.
After cancellation of the Niyamgiri mining project due to tribal rights and environment issues, the company had been asking for allotment of an alternative bauxite source in the vicinity of its refinery.OMC, owned by the state government, intends to sell 30 per cent of the bauxite produced from Kodingamali to end-user companies through auction. And, to keep the other 70 per cent for supply to alumina makers on a long-term linkage, at a price discovered through auction. The base price for auction is pegged at the cost of raising bauxite plus a 50 per cent margin. Apart from Vedanta and Hindalco, which have alumina/aluminium plants in Odisha, Anrak Aluminium, with an alumina refinery in neighbouring Andhra Pradesh, is keen to buy bauxite from OMC. “We expect the auction to be fair and rivals to not get into a bidding race to jack up the bauxite price unrealistically,” said the Vedanta official. “If the price discovery in the auction process remains fair and realistic, Vedanta can still get bauxite at Lanjigarh Rs 300-400 a tonne cheaper as compared to the current cost of procuring it from outside the state, despite high charges towards transportation.” In the absence of committed raw material supply, Vedanta is presently bringing bauxite from various places within India and from the West African state of Guinea, to keep the Lanjigarh refinery going. The plant, with installed capacity of two million tonnes of alumina output a year, is operating at about 50 per cent capacity.