Vedanta in talks for setting up auto ancillary park in Odisha's Jharsuguda

Anil Aggarwal-controlled Vedanta plans to set up a hot metal park at Jharsuguda in Odisha in partnership with the state government. The proposed joint venture would host auto ancillary units in the park with Vedanta’s aluminium unit being the anchor.

The company has already started working with all top automobile original equipment makers (OEMs) over the last few months and has signed agreements with them. Apart from other auto products, Vedanta is specifically looking at alloy wheels. “We are in talks with the government of Odisha to put up a hot metal park there and have automobile ancillary units. It (the plan) is at an active discussion stage. The government will provide land and enter into a joint venture with us,” Ajay Kapur, the newly appointed chief executive officer, Vedanta Aluminium and Power told Business Standard.

Vedanta has a cast house there but would need to make more investment. Besides, some land is available with the company while the state government will give some more. “This (the park) will help in Make in Odisha,” said Kapur.

The park is part of Vedanta’s plan to scale up the value curve. Other than value addition, the company is looking to increase metal capacity to 3 million tonne (mt) from 2 mt. “This would be mid-term. We are currently in the stage of putting together teams. We are already number one with 40 per cent of India’s aluminium market. With this, we will become strongest in the world,” added Kapur.

Vedanta’s Lanjigarh alumina refinery expansion at a cost of Rs 6,486 crore got a go-ahead from the Odisha government last November. The metals and mining conglomerate wanted to raise capacity from one to 6 million tonnes annually. At Jharsuguda, the investment planned is Rs 1,204 crore.

Approximately Rs 2,000 crore investment potential is seen in alloy wheels for two wheelers. According to the ACMA, there is an annual requirement of around 35 million alloy wheels in India for two wheelers, out of which only 13 million wheels are being produced by domestic manufacturers while the remaining is imported mainly from China.

The government had levied anti-dumping duty on four-wheeler alloy wheels imported from China, Thailand and Korea for five years.

Vedanta currently has an aluminium metal capacity of 2.3 mt. Last year, it ramped up alumina capacity by 25 per cent at Lanjigarh. “Our metal production at smelters in Korba and Jharsuguda, increased by 19 per cent but we had some headwinds on cost which largely came out of international commodity prices and more importantly because of coal crisis last year,” said Kapur.

Coal was available to independent power producers and not to captive power plants. There was also the issue of railway rakes being unavailable so the company had to import power. “We will further improve production this year. We have a long-term tie-up on bauxite, both locally from Odisha Bauxite Mining Company and Guinea where we have done long-term contract based on certain market indices. This gives us a good source at reasonable price to produce at Lanjigarh,” said Kapur.

For every one tonne of metal, two tonnes of alumina is needed, while for one tonne of alumina, three tonnes of bauxite. “Today we have refinery 1.8-2 mt capacity and we produce 1.5 mt so we are well placed to reach our capacity. We need 5.5 mt bauxite of which 3 mt we are getting from Odisha state government company and 0.5 from our own mines in Chhattisgarh. We are fully secured as far as bauxite is concerned. As we get more bauxite from Odisha, the price will get better,” Kapur added.

According to Kapur, imports were of good quality, so even though they pay more, it is very effective on the cost of ownership. Vedanta’s imports would reduce this year by 15-20 per cent.

“Overall, the market is on downward trajectory and there are tariff issues between the US and China. Alunorte has started a plant and the capacity has come so the price has mellowed down,” he said.

In the medium-term, the company wants to improve integration and improve refinery capacity and debottleneck. “We want to look at bauxite mining and bid for them and then build corridors to transport them. And, then build value added products which gives us much higher realisation,” he said.