India’s Realisation of Capacity

India has a history of constructing projects and having to leave them idle due to basic input energy and raw material limitations—examples include initial issues with the Jharsuguda II smelter expansion, the Angul smelter expansion, inability of Lanjigarh to utilise its full refinery’s capacity and the constructed but still idle Anrak refinery.

After several years of sitting idle, production capacity is now being more fully utilised, though domestic raw material limitations still exist despite the country being endowed with the ability to supply both bauxite and alumina. Sourcing bauxite to feed alumina capacity has been a persistent issue, despite the country’s ample reserves.

It was only between 2014 and 2017 that expansions at Vedanta’s Korba and Jharsuguda smelter completed their production ramp up, with portions of capacity sitting idle for extended periods following the completion of construction. The start-up of this unused capacity added around 1Mtpa of primary aluminium to India’s domestic production, along with increasing alumina demand by 2Mtpa. The government is also increasingly trying to promote vertical integration, with the proposal of industrial parks to capture synergies between upstream aluminium production and downstream value adding.

Looking forward, Vedanta has plans to further expand its Jharsuguda aluminium smelter, and state-owned National Aluminium Company (Nalco) has been assessing an expansion of its 0.49Mtpa Angul smelter, previously planned as a greenfield development at Sundargarh, as well as being requested to plan an increase in its domestic primary metal production up to 2Mtpa from the current 0.49Mtpa.

Having flagged expansion plans for an extended period of time, in 2021, Vedanta announced it was committing to spending US$300m through the year towards expanding Lanjigarh to 5Mtpa capacity and increase its smelting capacity to 3Mtpa.

Improvements in Alumina

India currently produces a surplus of metallurgical alumina to its smelter needs. Further, a level of discontent within a government focussed on improving domestic growth and rationalising imports, is the fact that Nalco often exports metallurgical alumina surplus to its own needs from the 2.3Mtpa Damanjodi refinery onto the seaborne market whilst, other domestic smelters, primarily Vedanta’s Jharsuguda smelter, are importing the feedstock from other countries. Nalco’s refusal to sell alumina to domestic competitors has been challenged, by Vedanta—with some success—through the courts.

Available alumina capacity in India is not currently fully utilised by domestic smelter capacity, so while it makes sense for the country to be a net exporter of alumina, on balance it should not necessarily be having to import material at the same time. Vedanta’s Lanjigarh refinery currently operates below capacity due to persistent bauxite sourcing limitations—which have more recently started being overcome—which has forced the company to source alumina from third parties for its smelting operations and delaying planned refinery expansion.

Hindalco is relatively self-sufficient, with its refinery supply, other than the 1.5Mtpa Utkal operation, sourcing bauxite from small, dispersed mining operations. The 1.5Mt Anrak refinery in Andhra Pradesh has sat idle after completion of its construction in 2013 due to the bauxite lease associated with the refinery being suspended. Inability to secure bauxite supplies has also been a factor in delaying development of the long-proposed Raykal JV refinery project of Larsen & Toubro (L&T) in Odisha.

To fully realise its spare, planned and proposed alumina capacity, India would require over around 30Mtpa of bauxite production capacity from its existing level. While they have reserves to significantly contribute to this, large bauxite mine prospects have faced several roadblocks to successful completion.

Bauxite in Abundance

According to the USGS, India has the 8th largest global reserves with over 650Mt bauxite—though this includes a significant amount of non-metallurgical grade. Large Indian bauxite deposits are located primarily in Odisha state, the formation of the Eastern Ghats ranges has resulted in hill-capping deposits containing significant resources. Outside the Eastern Ghats formation in Odisha extending into Andhra Pradesh state, bauxite generally occurs as smaller lensoidal deposits.

India is the world’s fifth largest bauxite producer with a total production of around 25Mtpa. It is telling that nearly half of this comes from just two mines in Odisha state—Nalco’s 7.2Mtpa Panchpatmali (supplying Damanjodi refinery) and Hindalco’s 4.2Mtpa Baphlimali (supplying Utkal refinery).

Generally, other refinery operations such as Muri, Belgaum, Renukoot and Lanjigarh source bauxite from many smaller operations and face potential supply security issues which are compounded by India’s internal transportation networks. In terms of scale, India has over 300 active bauxite mining leases with many producing <50ktpa using semi-mechanised or manual methods to produce both metallurgical and non-metallurgical bauxites, along with further unregulated and illegal operations.

Difficulty Developing Mines

Recent successful lease alocations over significant resources include Pottangi (76Mt to Nalco) and Kodingamali (85Mt to OMC for Vedanta) which are now progressing to development. The Sijurumali/Kuturumali (250Mt) deposit had also been allocated to the Raykal JV, with Vedanta as joint venture partner with L&T although lease conditions are believed to still require a greenfield refinery development and is preventing Vedanta securing its share of the resource for feeding its Lanjigarh refinery.

Significant hurdles have limited the development of other large bauxite mines in India. Surprisingly, while internal Indian transport networks are basic, road infrastructure has been less of a factor in supply insecurity than local opposition to development and lease allocation inconsistencies.

Cancellation of bauxite leases over the last few years have occurred as part of a process addressing previously undertaken improper lease allocation processes. For Andhra Pradesh’s Anrak refinery development, the revoking of an associated mining lease for the Jerrala deposit due to improper allocation by a previous state government has been a major factor in the delay to starting up the already constructed project. The ongoing auction and re-allocation process occurring to increase transparency and surety of tenure will hopefully improve confidence going forward.

Additionally, several significant bauxite deposits have been delayed or refused development due to local opposition citing protected forest or tribal areas, along with agitation from political elements. Examples include the Jerrala (250Mt) deposit in Andhra Pradesh, the Gandhamardan (300Mt) and Niyamgiri (75Mt) deposits in Odisha state. These resources had been previously allocated, but mining operations have not been established due to environmental concerns and/or local resistance.

Niyamgiri is a significant recent case, with the Odisha state government supporting Vedanta’s plans to mine the deposit to supply its already constructed Lanjigarh refinery, however the mine project was rejected by the national supreme court who ruled in favour of preserving the tribal lands of the Dongria Khond. This kind of issue will continue to be factored into ongoing attempts to develop bauxite whose location intersects tribal lands in India—particularly across Andhra Pradesh and Odisha where Maoist groups also opposing development alongside the tribal communities.