Industry Info

Vedanta's Jharsuguda aluminium smelter lies idle even without protests

The woes of Vedanta, which has invested Rs 45,000 crore in the aluminium and power sectors in Odisha, is not limited to the denial of bauxite from the Niyamgiri hills for its Lanjigarh refinery alone.

While all the attention is focused on the agitations against bauxite mining at Niyamgiri, another high-value investment of the company, a 1.25-million-tonne aluminium smelter of Vedanta Aluminium (now Sesa Sterlite Ltd) at Jharsuguda, has suffered for the last two years thanks to the reluctance of the state government to grant it special economic zone (SEZ) benefits.

The work on this smelter, built as an SEZ unit at a cost of Rs 25,000 crore, was completed in 2011.

Sources said the combined loss to the company because of stunted operations of the Lanjigarh refinery due to lack of adequate bauxite and non-operation of the SEZ smelter unit at Jharsuguda stands at a whopping Rs 6,000 to Rs 7,000 crore in the last two years.

Govt's reluctance
The reason for not starting the operation of the smelter is the reluctance of the Odisha government to grant the deemed distribution licensee status to the company according to the provisions of the SEZ Act to enable it to draw and use power from its own power plant at concessional rates.

Without the deemed licensee status, the company would have to spend Rs 2.40 extra for each unit of power it consumes, which it fears, would render the project unviable.

"While the normal tariff for aluminium industries is Rs 4.60 a unit, the same comes down to Rs 2.20 a unit for a deemed distribution licensee," pointed out a senior official of the company.

Section 49 of the SEZ Act, 2005, stipulates that SEZs can act as deemed distribution licensee under the. Electricity Act, 2003. "But when we sought this status from the state government, we were denied the facility", he added.

Interestingly, the Odisha government had recommended the grant of SEZ tag to the unit in 2008, on the basis of which the Centre had accorded it sector-specific SEZ status in February 2009.

When contacted, a senior state official said, "As of now, the aluminium smelter is the only unit in the Vedanta's SEZ complex. So, the energy producer and the consumer being the same entity in this case, the deemed distribution facility cannot be extended to the company." This stand of the state government has also been upheld by the Odisha Electricity Regulatory Commission and the Appellate Tribunal for Electricity when the company approached these for a grievance redressal. The company now plans to move the Odisha High Court on the issue. The Jharsuguda facility, apart from the 1.25-million-tonne aluminium smelter with SEZ tag, houses a 0.5 million tonne aluminium smelter and 1,215 Mw captive power complex and a 2,400-Mw coal-fired power plant with Independent Power Producer (IPP) status.

Meanwhile, the company was mulling to convert its 2,400-Mw IPP into a captive power plant (CPP) of its SEZ smelter to get around the legal hurdle to operate the unit. But this plan has also been thwarted with the Odisha government recently deciding not to allow conversion of IPPs into CPPs.

Source: Busienss Standard