Vedanta may shut Lanjigarh refinery

Green clearances for mines led to paucity of raw materials for running the plant

Faced with acute shortage of bauxite to run its one-million-tonne alumina refinery at Lanjigarh in Odisha, Vedanta Aluminum Ltd (VAL), an arm of London-listed Vedanta Resources, may issue a notice to the state government on Monday or Tuesday to shut down the unit.

The three-month notice would be sent to the state labour commission for legal formalities, said a top official of the company. After the notice period, the firm could shut the plant and lay off workers without any legal hurdle. The plant directly employs 5,000-6,000 people. A shutdown could affect 30,000 people dependent on the plant.

The official said the company had “zero stock” of bauxite and was running the plant intermittently recording only 55 per cent capacity utilisation. Against a daily requirement of 10,000 tonnes of bauxite, the firm is currently able to procure only 5,000 tonnes from the open market. “This cannot go on for long. Due to absence of any secured supply of raw material, we are losing heavily,” he said.
 

CHRONICLE OF A TROUBLED PROJECT

• 1997 Apr: MoU signed between Sterlite Industries and OMC for bauxite mine development and setting up of refinery at Lanjigarh
• 2004 Sept: Ministry of Environment and Forests grants green clearance for the one-mtpa refinery
• 2004 Nov: Odisha forest department sends Vedanta showcause notice for encroaching on 10.41 acres of forestland for its refinery
• 2005 Mar: Supreme Court’s Central Empowered Committee questions MoEF; ministry directs Vedanta to halt construction work
• 2008 Aug: Supreme Court clears the mining project by Sterlite India-Orissa Mining Corporation, with certain conditions
• 2009 Apr: MoEF grants environmental clearance for the mining project
• 2010 Aug: MoEF rejects earlier forest clearance for the mining project on the basis of the Saxena Committee report
• Aug 2010- Aug 2012: VAL operates refinery on bauxite sourced from outside the state, while fighting MoEF in the court
• 2012 Sept: VAL is considering shutting down the Lanjigarh refinery due to lack of bauxite

VAL has invested Rs 5,000 crore in the Lanjigarh plant so far and incurred losses to the tune of Rs 3,000 crore.

A top company official told Business Standard: “At the shareholders’ meet in London this week, the VAL issue was raised. It was agreed the firm might look at shutting down operations there. There is shortage of bauxite. Without raw materials, we cannot run the plant.”

When contacted, a company spokesperson declined to comment on the closure, but added “a final decision on the matter would be taken next week”.

Odisha Industries Secretary Parag Gupta said: “VAL had written to the state government last month about dwindling bauxite stock. But there is no communication from it on a temporary shutdown of the plant.”

Before setting up the Lanjigarh refinery, Vedanta had entered into an agreement with Odisha Mining Corporation (OMC) for supply of bauxite. But attempts to mine bauxite at the ecologically-sensitive Niyamgiri hills under OMC’s leasehold were red-flagged by the environment ministry, which subsequently scrapped the Stage-II forest clearance. This made the company wholly dependent on bauxite supplies from other states.