Vedanta to ramp up aluminium SEZ capacity from next fiscal

Odisha power regulator's order granting firm more energy will help hike capacity on one of its smelting facilities

Buoyed by an order of the state power regulator here, diversified metals and mining major Vedanta Ltd is gearing up to ramp up capacity at its aluminium smelter SEZ (Special Economic Zone) at Jharsuguda from the next fiscal.

"The state power regulator, OERC (Odisha Electricity Regulatory Commission), has allowed us to use three 600 Mw units (or 1800 Mw) from our own 2,400 Mw power station to run our smelter. The OERC order will facilitate us to expand our aluminium smelting capacity. With the availability of our own captive power, we hope to ramp up operations from our aluminium SEZ from the next fiscal", a senior Vedanta executive told Business Standard.

Vedanta owns two aluminium smelting facilities at Jharsuguda. While the standalone smelter of 0.5 million tonne per annum (mtpa) is running at full capacity, the other smelting unit of 1.25 mtpa capacity, within its product specific SEZ, was running at depleted capacity for want of power. In the October-December period of this fiscal, the SEZ smelter produced 19,000 tonne of aluminium.

Initially, the first potline of the SEZ smelter with 0.3 mtpa capacity would be put to operations, the official said. Vedanta's product specific SEZ includes an aluminium smelter complex where the proponent has already invested Rs 12,000 crore. The commissioning of the SEZ facility promised to boost the local economy by generating business potential worth Rs 15,000 crore every year. Direct and indirect employment opportunities for nearly 12,000 persons are set to be created.

Vedanta runs a 2,400 Mw (4x600) coal-fired power station at Bhurkamunda in the vicinity of its smelting facilities. With the recept of the OERC order, Vedanta can use up to 1800 Mw power to run its smelter operations. Three units of 600 Mw each (or 1,800 Mw) would get the status of CPP (captive power plant) provided Vedanta uses at least 51 per cent of the power for its captive consumption. The other unit of 600 Mw would be dedicated to supply power to state-owned Gridco as per the power purchase agreement signed between the two entities.

The use of captive power would mean substantial savings for Vedanta on power since supply of power from CPP does not attract cross subsidy surcharge (CSS). Thus, it is expected to scale down aluminium production cost for Vedanta as power contributes 40-50 per cent to the cost of production of the metal.

In its production release for the quarter ended December 31, Vedanta said its aluminium production cost declined seven per cent quarter-on-quarter, driven by cost optimisation measures.

On December 1, the cost of production (CoP) at Jharsuguda smelter was $1,485 per tonne compared to $1,599 per tonne in the previous quarter, primarily due to lower alumina cost and lower power cost driven by coal prices. Also, the CoP at its Korba smelter improved significantly to $1,599 per tonne, compared to $1,725 per tonne. The significant cost improvement was on account of lower alumina price and reduced power cost driven by improved coal mix and lower coal prices.