OMC says hands tied down by law, can't help Vedanta

Last Updated: Sun, Sep 09, 2012 20:27 hrs

The steel and mines department and Odisha Mining Corporation (OMC) have expressed their inability to provide Vedanta Aluminium Ltd (VAL) alternative source of bauxite for its Lanjigarh alumina refinery because of constraints of law even as the company has sent an advance notice for shut down of the plant attributing the cause of such extreme step to non-supply of bauxite as per the agreement with the state-run mining company.

"OMC has nothing to say in this matter as our agreement with Vedanta was limited only to mining at Niyamagiri hills, which is sub-judice currently. Regarding supply of bauxite from other sources, it is the look out of the government and Vedanta,” said Saswat Mishra, chairman-cum-managing (CMD) director of OMC.

In October 2004, Vedanta had signed a Memorandum of Understanding (MoU) with Odisha government to set up an integrated alumina and aluminium complex along with the associated captive power plant. The state had committed to provide it 150 million tonnes of bauxite reserve for the project.

The Odisha government had identified Niyamgiri mine as the initial source of bauxite supply and had instructed state-run miner OMC to form a joint venture with Vedanta to excavate the 78 million tonne deposits at the site. However, Niyamgiri mining plan was later shot down by Union Ministry of Environment and Forest (MoEF), which refused to give it stage II forest clearance and also withdrew the environment clearance granted earlier.

VAL pointed out that the MoU included supply of additional bauxite apart from that lying in the Niyamgiri mines. So it was incumbent on the state to arrange the material from other sources. However, the state has not made any attempt in this regard though it possessed more than half of the country’s bauxite reserves.

A senior government official in the steel and mines department said there was no violation of the agreement as there were rules and regulations to award mining leases to companies.“I do not think we have violated any clause mentioned in the agreement. We must follow the rules and current practices,” he said.

In absence of the assured supply, the company had to rely upon bauxite mines of Andhra Pradesh, Chhatishgarh and Guajarat to run its refinery even though it had designed its refinery keeping in mind the locally available bauxite when it started its refinery operation five years ago.

“However, continuing the same is no longer possible unless the Odisha government finds a solution for supply of bauxite,” the company said in the letter while giving a deadline of December 5 to shut down the plant unless the supply issue is resolved..

OMC said, at present it does not have any other bauxite mine, but it is expecting to get forest clearance for another bauxite mine at Kodingamali for which it has signed a Vedanta-like agreement with Hindalco. It has also applied for some other mines with smaller bauxite deposits and has been recommended by the state government to operate the Sasubohumali mine.

The state-owned mining company said, even if it had other bauxite mines, it cannot supply the mineral to Vedanta as this would violate the laws.

“The agreement was only for Niyamagiri mines (with Vedanta) and we cannot supply bauxite to Vedanta from other mines as it would violate the rules,” said MishraTo run the one million tonne per annum (mtpa) refinery plant at full steam, VAL required 10,000 tonnes of bauxite daily, but it was barely able to operate at 50 per cent capacity by procuring 5,000 tonnes from the open market.

Earlier this year, VAL acquired stake in Raycal, a bauxite mining company of Larsen and Turbo (L&T), after the exit of Dubai Aluminium Company (Dubal). However, the project will take about three to four years to produce bauxite.

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