Odisha exploring possibility of mining lease grant to L&T

Move may rescue Vedanta refinery

Vedanta’s ailing alumina refining unit at Lanjigarh (Odisha) shut since December 5 last year on bauxite unavailability can hope for a long-term succor on raw material supplies.

The state government is considering possibility of granting mining lease (ML) to L&T for Sijimali and Kutrumali bauxite mines in south Odisha’s Rayagada and Kalahandi districts. The grant of ML is expected to come to Vedanta's rescue since it had picked up 24 per cent stake in L&T promoted Raykal Aluminium which was to implement the engineering major’s three million tonne refinery project at Rayagada.

“We have sought the views of the advocate general-Odisha on the possibility of granting ML to L&T. Our consideration stems from the recent shutdown of Vedanta’s Lanjigarh refinery that has triggered job losses, impacting livelihoods of hundreds of families. Vedanta which has partnered L&T for the latter's alumina refinery project has requested us to expedite grant of ML for Sijimali and Kutrumali bauxite mines. Grant of ML for these two mines can enable Vedanta to run its refinery as it can act as end-use project for the mines,” said a senior government official.

Advocate General Ashok Mohanty denied comments, citing sensitivity of the matter.

L&T had won prospecting license (PL) for Sijimali and Kutrumali bauxite mines with total deposit of close to 300 million tonnes, in 1992. But two years later after the expiry of PL, the state government denied ML to L&T since it had no end-use plant.

In 2005, L&T through a joint venture with Dubai Aluminium (Dubal) had proposed Rs 5,000 crore alumina refinery of three million tonne per annum (mtpa) capacity at Rayagada. Though a special purpose vehicle (SPV) called Raykal Aluminium was formed for the purpose, the project remained a non-starter.

Seven years later in 2012 when Dubal walked out of the SPV, VAL bought 24 per cent stake in the project for Rs 200.70 crore. VAL also has an option to buy out the entire 100 per cent stake in the SPV valued at Rs 1,811 crore.

VAL officials did not respond to phone calls on the issue.

Since the start of its operations, VAL has been running its Lanjigarh refinery on externally sourced bauxite, sustaining losses of around Rs 3,000 crore. VAL had a joint venture arrangement with state controlled miner – Odisha Mining Corporation (OMC) for supply of bauxite from the ecologically sensitive Niyamgiri hills with proven bauxite deposits. But, OMC could not open the mine as the Union environment ministry scrapped Stage-II forest clearance for the mine on August 24, 2010.

VAL was forced to go for temporary shutdown of the one million tonne refinery on December 5 last year. Since then, the company has been struggling to obtain the raw material from alternative sources. To operate at full capacity, VAL needed 300,000 tonnes of bauxite every month.

Recently, it had urged the state government to expedite processing of pending applications of OMC, especially those bauxite leases falling under non-forest areas. The company had also urged the state government to explore possibility of excavating bauxite from iron ore leases of Steel Authority of India Ltd (SAIL) and Rungta Mines which are lying abandoned and where presence of bauxite has been proven.

The company had also filed 26 applications for alternative bauxite mining leases of which 14 are at PL stage and the balance 12 at ML stage. These included Karlapat (south), Sasubahumali, Gandhamardhan and Ghusramali to name a few.