Vedanta seeks SEZ tag for Orissa unit

Vedanta seeks SEZ tag for Orissa unit

SURESH NAIR, Economic Times

10th May 2006

Mumbai: Vedanta Resources, the London Stock Exchange (LSE) listed metals and mining major has applied for special economic zone (SEZ) status to be granted to its Orissa based aluminium smelter project. The central government is currently examining the proposal.

If the status is granted to the project the company will be able to operate the smelter at a minimal cost and it will save a lot of cost on account of taxes. Vedanta officials confirmed that the company has applied for SEZ status for the Jharsuguda project. The company had in fact announced the project in 2005 before the SEZ policy was announced by the centre.

As the aluminium smelter project is expected largely to cater to the export market the company's decision to apply for SEZ status is aimed at taking full advantage of the SEZ policy. Vedanta is setting up the five lakh tonne per annum greenfield aluminium smelter at Jharsuguda in Orissa with a 1,215 MW power plant at an estimated cost of Rs 7,000 crore ($1.6bn). According to company officials around 40 % of the funds for the project will be generated through internal accruals while 60% would be debt funded.

Setting up of the smelter is a major step in Vedanta's corporate plan to create one million tonnes of aluminium capacity in India.

The company already has 3.5 lakh tonnes of smelting capacity at Balco and over 30,000 tonnes of aluminium smelting capacity at Malco. Both these companies are controlled by Vedanta.

The company will also rank among the top ten aluminium producers of the world if the greenfield smelter project is successful. The smelter will use alumina from the nearly Lanjigarh alumina refinery which is being set up at an estimated cost of Rs 4,500 crore and is nearing completion.

The company has also been allotted mines in the same region to mine bauxite, which will feed the refinery. The grant of mining leases has been challenged in the Supreme Court, and is currently the subject of litigation. Company officials clarified that the refinery will however not have an SEZ status.

The smelter project will be implemented in two phases over 3-5 years. The first phase will include setting up of a 2.45 lakh tonne per annum smelter with associated power facilities.

The second phase will involve a similar capacity being added taking the total smelting capacity to five lakh tonne. Setting up the five lakh tonne smelter is also part of Vedanta's larger plan to reach a million tonne capacity in each of the three non-ferrous metals, that is zinc, copper and aluminium