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Anrak Aluminium looks to Odisha for bauxite supplies

Tuesday, Jun 13, 2017

Fearing that the investment on its Rs 5,600 crore alumina refinery in Andhra Pradesh may go the Vedanta way, Anrak Aluminium, a joint venture of the Penna Group and Ras-Al-Khaimah Investment Authority (UAE), the company has turned to Odisha for bauxite supplies.

Anrak Aluminium set up the alumina refinery of 1.5 million tonne annual capacity at Makavarapalem (Andhra Pradesh) on promise of assured bauxite supplies from Andhra Pradesh Mineral Development Corporation (APMDC). The deal mandating supply of 224 million tonnes of bauxite was signed during the reign of former chief minister Y Rajashekhar Reddy. But, the deal was scrapped in March last year by the N Chandrababu Naidu government which felt the deal was structured in a manner that would not benefit the local tribals.

Construction work on the refinery is completed in 2013 but the project could not be commissioned without bauxite availability in sight. Vedanta's Lanjigarh refinery in Odisha was also struggling for local bauxite sources despite being in operations since 2005.

With hopes of getting bauxite from Andhra Pradesh dimming, Anrak Aluminium has asked the Odisha government to make arrangements for its starving refinery unit.

In a letter to Odisha industries secretary, H Mahadevan, president (projects), Anrak Aluminium said, “For various reasons, we have not been provided with bauxite by the APMDC because of which the alumina refinery has not been commissioned as of yet, even though the construction was completed way back in 2013 at a cost of Rs 5600 crore.”

To fast track its refinery project, Anrak Aluminium has sought allotment of bauxite resources of 150 million tonnes. The company has suggested that mines may be allotted to state-run Odisha Mining Corporation (OMC), preferably on the Odisha-Andhra Pradesh border and bauxite be supplied to it.

Anrak Aluminium is also interested to put up 0.3 million tonnes per annum smelter plant at Gopalpur in South Odisha with  focus on downstream aluminium products.

“Our investment on the aluminium smelter proposed in Odisha is Rs 9000 crore and if we put up a CPP (captive power plant), the investment can go up to Rs 12,000 crore. We have chosen to locate the smelting unit at Gopalpur to save on logistics cost. We have discussed this proposal with the Odisha government and are awaiting their response”, Mahadevan told Business Standard over the phone.

To make its Odisha smelter viable, the company has asked for GST holiday/reimbursement for 10 years, tax exemption for input material during construction and waiver of cross subsidy and other levies. Anrak needs 1000 acres for the aluminium smelter and expects to commission the project by December 2021 subject to availability of bauxite and receipt of all clearances. Since aluminium smelting needs huge quantities of power, Anrak is in talks with private power producers in Odisha and Chhattisgarh.

Undelivered bauxite has almost pushed Anrak Aluminium's project into a blind alley. The stakes for the project are high with an overseas entity as an equity partner. Initially, Anrak Aluminium was forged as a 70:30 joint venture between Penna Group and the Ras-Al-Khamiah Investment Authority (RAKIA). Later, the equity holding is believed to have changed to 87:13.

Trouble in the project is out in the open with RAKIA serving an arbitration notice on the Government of India in January 2017 seeking either compensation on its total investment of $44.71 million or ensuring immediate bauxite supplies to the refinery project. The international arbitration notice has been issued to the Prime Minister's office and several ministries. An inter-ministerial group is dealing with the row.(business standard)

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