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Vedanta to save Rs 800 per tonne in long-term bauxite deal with OMC

Long-term supply price arrived at Rs 465 per tonne in first bauxite auction

Dillip Satapathy  |  Bhubaneswar 

Vedanta

After years of struggle to secure raw material for its alumina refinery following fiasco, has finally clinched a deal with state-owned (OMC) for the supply of to its beleaguered plant.

As a result of this deal, is expected to get 0.8 million tonnes of from the in the current financial year at a price, which is estimated to be Rs 700 to Rs 800 per tonne cheaper compared to the landed cost of at the plant site at present.

In the first-ever auction of at the country, Vedanta, along with Hindalco and Anrak Aluminium, have snatched up 0.19 million tonnes of offered by from its newly opened Kodingamali mines in Koraput district.

In the process, has discovered the rate for long-term supply of to Vedanta, which is estimated at about Rs 465 per tonne at the pithead excluding the royalty payment to the state government and statutory contribution to (DMF) and (NMET) fund.

In the auction, while two units of Hindalco (Belgaon and Muri) picked up 0.105 million tonnes of material with a quote of Rs 462 per tonne, has booked 20,000 tonnes of at the same rate. The other participant, Anrak Aluminium from Andhra Pradesh has lifted the rest 65,000 tonnes at a price of Rs 472 per tonne.

"Hindalco and clinched the deal at the floor price which was the cost of raising plus 50 per cent margin for OMC", said a government official.

The mining cost for Vedanta's competitors, like Nalco and Hindalco, which have captive mines, hovers around Rs 350 per tonne.

The pithead cost of is expected to go up by another Rs 200 per tonne after the payment of royalty and contribution to and

While allowing to go for auction of from its Kodingamali mine, the state government had reserved 70 per cent material raised from the mine for long-term supply while setting aside only 30 per cent output to be sold through auction. It had asked to discover the price for long-term supply based on weighted average of the price quoted in the auction.

Given the above quotes in the first auction, the weighted average rate comes to Rs 465 per tonne, at which will sell the on long-term contract till the next auction happens six months after.

The government notification also stipulated that the industries with their plant inside the state and not having captive mine will be prioritised for a long-term supply contract. This makes the only company, among all those who participated in the auction, with whom is expected to enter into a long-term contract for the sale of 70 per cent of the mine's output.

In addition to the long-term contract price and statutory payments, is likely to spend Rs 1,200 for transportation of to the plant from the mine, which is about 120 km away. Put together, the cost of at the plant site is estimated at about Rs 1,900 per tonne, which is still cheaper by about Rs 700 to Rs 800 per tonne at which the company is getting now, said an analyst.

Unable to source raw material within Odisha, is bringing from different states in India and Guinea, outside the country, to keep its refinery afloat. The plant, with an installed capacity of 2 million tonnes of alumina output per annum, is running at about 50 per cent capacity.

mine is expected to meet a portion of plant's requirement that requires 6 million tonnes of to run at full capacity. The Kodingamali mine with a deposit of 81 million tonnes has environment clearance (EC) to produce 3 million tonnes annually. But due to logistics bottlenecks, intends to produce 1.26 million tonnes in the first year which would be stepped up gradually. That means would get 0.8 million tonnes in the initial year which go up as ramps up production.

First Published: Thu, April 12 2018. 23:56 IST
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