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Can Vedanta restart Lanjigarh refinery?

Source : BUSINESS_STANDARD
Last Updated: Tue, Dec 11, 2012 03:50 hrs
(Blank Headline Received)

While the government has belatedly sprung into action to restore bauxite supplies and allot new mines to Vedanta, winning the regulatory green light won't be easy

Eight years ago, Kada Majhi, a tribal woman of Kinari, a village in the Kalahandi district of Odisha, eked out a living with paltry wages as a daily labourer. When Vedanta Aluminium started constructing a one-million-tonne-per-annum aluminium refinery at Lanjigarh, she, along with her husband and five children, shifted to Niyamagiri Vedanta Nagar, a model township, set up by the company to rehabilitate persons displaced by the project. Since then, the economic profile of the family has improved significantly. While Kada, 32, started working as a tailor in the Maa Manikeswari Self Help Group, promoted by Vedanta Aluminium, after required skill training, her husband got a job in the factory that fetched him Rs 15,000 per month. The children study at the DAV Vedanta International School - the first in the Majhi family to ever enter a classroom. The same story of improved fortunes runs across the 121 displaced tribal families settled in Vedanta Nagar, most of whom for the first time have accessed modern amenities like a pucca house, electricity, piped drinking water, healthcare and education - all free of cost.

In fact, the sudden change in lifestyle of these families had in the past led to agitations in the nearby villages - people there demanded similar benefits even at the cost of taking away their land. While most of the displaced persons have been provided permanent jobs by the company, drawing a salary of Rs 10,000 to Rs 15,000 per month, about 500 of the 1,800 project-affected persons (those who lost their land and not home) have been engaged by contractors and earn up to Rs 5,000 per month. No wonder, ever since Vedanta announced that the refinery would be closed due to non-availability of bauxite, they are a worried lot, with a question mark over their future and livelihood. "What will our children do? Where can we find another job if this plant closes down", asks Kada.

"The dream of several educated youth in Kalahandi district to get the job in their own district will be shattered if the plant is not revived", says Parimita Behera, an assistant manager in the plant. Incidentally, Vedanta Aluminium is the only large industry in Kalahandi, a tribal district which ranks among the poorest in the country. The anxiety is all pervasive in Lanjigarh, which saw a spurt in economic activity over the last decade, catapulting it from a small village to a small town with the arrival of Vedanta. The factory currently engages about 3,500 people - 550 on the company's payroll and another 3,000 through the contractors. There are also about 5,000 others who earn their livelihood by working in small shops, garages, filling stations, hotels, transport businesses, etc, in and around the town. But amidst the dismay, a tinge of optimism is displayed by the locals who hope the shutdown of the refinery may be "temporary". "We expect the plant will reopen soon. The government should take urgent steps to supply bauxite", says Sridhara Tensia, president of the Lanjigarh Anchalika Bikash Parishad.

The company, in its advance closure notice to the government, had expressed its intention to shut the refinery temporarily from December 5, citing non-availability of bauxite. It had urged the government to arrange alternative sources of bauxite (other than the controversial Niyamgiri deposit) for the revival of the unit. More than two years ago, Vedanta Aluminium had sought bauxite supplies from seven alternative mines, five in Rayagada and two in Kalahandi, after the Union ministry of environment & forests had scrapped the stage-II forest clearance for Niyamgiri lease in August, 2010.

CASE HISTORY
Timeline of Vedanta's Lanjigarh refinery and Odisha Mining Corporation's Niyamgiri project
1997: Anil Agarwal-owned Sterlite Industries signs MoU with Odisha govt for bauxite mining project at Niyamgiri
Mar 03: Sterlite applies to MoEF for environmental clearance for the proposed refinery at Lanjigarh
Sep 22,'04: MoEF grants the refinery environmental clearance on condition that Sterlite got mining clearance before operationalisation of the refinery
Sep 05: The Central empowered committee (CEC) recommends that mining should not be permitted in the Niyamgiri Hills
Feb 06: The Supreme Court refers the matter to MoEF's Forest Advisory Committee (FAC) - which looks into diversion of forest land for non-forest purposes - and asks for a report in three months
May, 07: CEC reiterates its stand that MoEF had acted irresponsibly and with undue haste in granting clearances to Vedanta
Aug 07: Vedanta Aluminium commissions 1mtpa refinery
Apr 26,'09: Public hearing held for six-fold expansion of Vedanta refinery.
Apr 28,'09: MoEF clears Niyamgiri mining project
Aug 24,'10: MoEF scraps Stage-II forest clearance for Niyamgiri lease
Mar 9,'11: Odisha Mining Corporation (OMC) moves Supreme Court against MoEF
Sep 6,'12: Vedanta Aluminium serves three-month closure notice to Odisha govt to close refinery by December 5
Dec 5,'12: Vedanta Aluminium shuts down Lanjigarh refinery and 75-Mw captive power plant attached to it

The Odisha steel & mines department, though belatedly, has started the process of identifying other prospected bauxite deposits where mining operations can commence with the statutory clearances. But the task of allotting another mine to Vedanta Aluminium is not easy.

The search for bauxite
"There is no dearth of bauxite in the state which sits over a deposit of two billion tonnes, accounting for nearly 60 per cent of the entire country's reserve. While exploration and prospecting have not been taken up in most mines, in others, the opening of mines will take at least three to four years due to cumbersome regulatory and approval process," says a senior Odisha government officer. Even then, there could be problems. "Who can also guarantee that Niyamgiri-type agitations will not show up there too, stalling the mining activity? Moreover, the Niyamgiri case is still locked up in the Supreme Court and there is nothing the state government can do about it," the officer adds.

After being denied access to the Niyamgiri deposits, Vedanta Aluminium was sourcing bauxite from other states like Chhattisgarh, Jharkhand, Andhra Pradesh and Gujarat to keep its refining operation afloat. But this was thwarted with regulatory, logistic and procedural issues coming in the way. "During the last five years of curtailed operation, the company has lost about Rs 2,500 crore on an investment of Rs 5,000 crore in the Lanjigarh plant", says Mukesh Kumar, chief executive officer, Vedanta Aluminium. On the other hand, the company, he claims, has contributed Rs 830 crore to both the Centre and the state government in the form of taxes and spent another Rs 170 crore on peripheral development activities in Lanjigarh. Now, in the idle state also, the company has to spend Rs 10 to Rs 11 crore towards salaries, electricity bill, payment to contractors, establishment cost and maintenance.

Vedanta Aluminium, on its part, is trying to secure some bauxite supply from places like Gujarat and Maharashtra to get the Lanjigarh plant going. It is currently in talks with some exporters there. The FoB (freight on board) price of bauxite being shipped to the United Arab Emirates, China and Japan is $26 per tonne, which is almost same as the price at which the company procures the raw material from Gujarat Mineral Development Corporation. It is not the price, but the availability, that is a concern. Most of the exporters have prior commitments, putting pressure on availability in the open market. It is estimated that this year bauxite exports from India may cross 3 million tonnes. If the government does not ban the exports or, at least, impose duty to discourage export, no bauxite may be available for domestic industries without mines and it will lead to same situation as in the case of iron ore, according to Kumar.

Kumar says that unless the company has a bauxite stock that can meet its requirement for four to five months, it will not reopen the plant. "There is no point reopening and then shutting down again. Running the plant at low capacity (20 to 30 per cent) in the absence of adequate bauxite also is a big risk to the machineries," he adds. Vedanta Aluminium requires about 10,000 tonnes of bauxite per day, or 3.65 million tonnes a year. Out of this, it is assured of about 3,000 tonnes (1.1 million tonnes a year) from a mine of its sister concern, Balco. This leaves a gap of 7,000 tonnes per day, or 2.55 million tonnes a year. If it wants to restart the plant with at least four months of bauxite stock, it will need to procure at least a million tonnes straight away. In spite of the helping hand from Balco, this looks a herculean task under the present circumstances.

Uncertain prospects
Faced with these bleak prospects, the company is pinning its hopes on the outcome of a case pending in the Supreme Court on resuming mining at Niyamgiri. Odisha Mining Corporation, which had entered into a pact with Vedanta Aluminium for the supply of bauxite from its Niyamgiri deposit, has gone to the Supreme Court after the ministry of environment & forests cancelled the forest clearance for the mining activity following persistent protests by some tribal community and social activists. The hearing on the case has recently been deferred to January 11 with the court seeking more details from both the Centre and the state government on compliance of the Forest Rights Act at the project site.

Whatever may be the outcome of the case, the protesters are unrelenting. "It is a very calculative move by Vedanta Aluminium. The company has shut down the refinery to put pressure on the government and create public opinion in its favour when the matter is being heard in the Supreme Court", says Prafulla Samantara, a social activist who had gone to the Supreme Court against the company's proposed bauxite mining at Niyamagiri complaining about its adverse impact on local flora and fauna and the primitive Dongaria Kondh tribes inhabiting the hill steps. "We will continue to oppose the project till it is permanently closed," he adds. The opponents even brought out a rally celebrating the closure of the plant, a day after it was shut down.

With the odds heavily stacked against the project, no doubt, it is going to be a long winter ahead for Vedanta Aluminium and the people dependent on it in this poverty-stricken tribal belt.


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