New Delhi: Vedanta group may close its 1 MTPA alumina refinery in Odisha's Lanjigarh by December first week as the company is facing severe shortage of bauxite, company sources said.

"We are in the process of giving three month's notice to the Department of Labour, Odisha, to close operations. It is a mandatory requirement.

"The notice will be served within the next couple of days. There is no bauxite left for us to run the refinery," a source in the company said.
When contacted, Vedanta Aluminium's Managing Director S K Roongta said, "In the absence of sourcing bauxite from Odisha itself, we are getting driven to a situation when continuation of operations is becoming difficult."

Vedanta's unlisted subsidiary Vedanta Aluminium runs the alumina refinery, along with a smelter of 1.5 million tonnes per annum (MTPA) capacity and 1215 MW power plant in Odisha's Lanjigarh.

The company has so far invested about Rs 50,000 crore to develop the refinery, smelter and captive power plant and employs about 7,000 people.

Alumina is the intermediate product to produce aluminium. Three tonnes of bauxite is required to produce 1 tonne of alumina. Half a tonne of aluminium can be extracted from 1 tonee of alumina.

According to the source, due to the dwindling stock of bauxite, the refinery is running at "less than 50 percent capacity" and the company is incurring "a daily loss of about Rs 3 crore".

"We hardly have 2-3 days inventory of bauxite left. From Odisha, we have not been able to source bauxite despite the fact that we have a 25-year long offtake agreement with Odisha Mining Corporation (OMC) for annual supply of 3 MT of the raw material," he said.
Despite the Supreme Court clearing bauxite mining in Niyamgiri Hills in the state in 2008, the supply problem has continued for the company as it was subject to approval from the Environment Ministry.

"The Environment Ministry has held several rounds of consultation to do mining in the Niyamgiri Hills but is yet to give its approval," he said.

In the meantime, the company has been sourcing bauxite from other states like Gujarat, Andhra Pradesh, Chhattisgarh and Jharkhand but "most of these sources have also dried up as they are very smaller mines and they have their own mining issue", he said.

Besides, sourcing from other states has increased the landed logistics cost for the company to about Rs 2,200 per tonne, thereby increasing the alumina production cost to about Rs 19,250 (USD 350) per tonne.

"This makes the entire operations unviable. Our total aluminium cost is USD 2,000 per tonne more than the prices at the London Stock Exchange," he said.


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