Vedanta’s anxiety in Odisha continues

10 years and counting. Even after investing Rs.52,000 crores in Odisha – the largest ever by a single corporate house – Vadanta Limited is still not sure about its future in the State. The company viewed its dream of setting up Aisa’s largest single location aluminium complex here to be the State’s pride, but the slow moving and dogmatic State mechanism is costing it dearly.

The single unit that is potential enough to propel Odisha on the global map as a critical and potential aluminium hub is forced to operate at just about 25% of the installed capacity. State’s failure in providing promised raw-material linkage to run the Lanjigarh refinery and lack of power to begin commercial production in 1.25 MTPA smelter at Jharsuguda has left Vedanta groping in the dark.

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Vedanta’s Jharsuguda complex houses 1.75 MTPA capacity smelter and 1315 MW capacity Captive Power Plant apart from 1 MTPA refining capacity at Lanjigarh. But the company is facing difficulty on two aspects. 1.25 MTPA smelting capacity at Jharsuguda is lying idle for lack of desired power supply. The State Government is yet to allow the company to draw power from Vedanta’s own 2400 MW power plant located at the same site. Under present norms, the company has to pay huge cross-subsidy charges to use this power.

This additional cost is making makes it absolutely unviable for the company to initiate production in the 1.25 MTPA smelter.Group Head Anil Agarwal’s hectic parleysduring last year has not been able to roll the ball for Vedanta. At Lanjigarh, Vedanta’s alumina refinery is forced to operate way below its installed capacity owing to State Government’s failure to provide the bauxite it committed in the initial MoUA memorandum of understanding (MoU) is an agreement between two (bilateral) or more (multilateral) parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It is often used in cases where parties either do not imply a legal commitment or in situations where the parties cannot create a legally enforceable agreement.... Therefore the company has to resort to costly imports and run the unit at just about 25-30% of its capacity.  Operations of the Vedanta unit at full capacity can be a game changer for the socio-economic scenario of the State, especially the western parts. The struggling unit alone promises to create direct and indirect employment opportunities to the tune of over 1,00,000 if unleashed at full throttle.

This will be further augmented by the expected 100 ancillary and downstream industries and 10,000 vendors who will add to employment generation, mostly local in nature.Direct benefits to the State is also noteworthy. At full capacity, Vedanta will contribute Rs. 2,500 crores to the Exchequer in annual taxes and duties as compared to Rs 900 crores at present.  The biggest advantage for the State, however, will be its emergence as aluminium hub in the global arena. Odisha as a State is gifted abundantly by nature when it comes to raw materials for aluminiumindustry.

Success of the Vedanta project will open gates for other such aluminium units which can be accommodated in Odisha accelerating its socio-economic growth.  State’s industrialization dream needs active support of the policy makers. Bauxite-linkage and viable norms for drawing power will enable Vedanta to drive its operations to the desired levels and boost the local economy in the process. The company has been struggling in the State with a lot of patience, but with the Government mechanism not buzzing from their position and its future hanging in balance, how long can it carry on remains a Rs.52,000 crore question.

http://www.orissadiary.com/ShowBussinessNews.asp?id=59258#sthash.FcIY6eGk.dpuf

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