Vedanta bets on captive bauxite amid pricing dispute with Odisha Mining Corp

Mumbai: Vedanta Aluminium Metal Ltd has secured captive supplies of bauxite just as a pricing dispute with its long-term supplier, Odisha Mining Corporation Ltd (OMCL), threatened to upset the company’s cost calculus, helping India’s largest producer of the silvery-white metal keep a lid on input costs.

The company received a long-pending consent to operate its Sijimali bauxite mine in Odisha in September and now plans to begin production this financial year itself, targeting 1 million tonnes of output. The production is expected to rise to 5-6 million tonnes in FY28. The mine is expected to replace imported bauxite and generate savings of about $25 per tonne, chief financial officer Anup Agarwal said during the company's September-quarter earnings call.

The savings will be more than the cost increase of $8-10 per tonne that the company will face due to higher prices from OMCL, Agarwal said.

Vedanta requires about 12 million tonnes of bauxite a year to run its 3 million tonnes of aluminium capacity. Bauxite is the ore from which aluminium is extracted, and despite its scale of production, Vedanta relied entirely on bauxite sourced from OMCL and imports to keep its operations running. While imported bauxite is more expensive compared to what its peers paid for the raw material, the low-priced sourcing from OMCL helped the company achieve a competitive blended cost.

Vedanta and OMCL have a long-running dispute over the latter’s demand for higher prices under its supply arrangement with the company. Vedanta continues to contest OMCL's revised bauxite pricing in the Supreme Court. The matter has been partially heard and will come up for further hearing after the Diwali break. If the decision goes against it, the company will have to honour a ₹5,600 crore demand from OMCL for past dues and pay higher prices for future procurement of bauxite.

For now, Vedanta continues to procure bauxite from the state-owned miner under protest, paying the prices determined by OMCL while the legal proceedings remain pending, Agarwal said. In fact, the company plans to increase sourcing from OMCL from the current 2.4 million tonnes a year to as much as 4.8 million tonnes as the miner plans to ramp up its production capacity. This is because as per OMCL's long-term linkage policy, 80% of the expanded output is reserved for Odisha-based refineries.

“Vedanta should see overall cost savings as it increases domestic bauxite sourcing through the ramp-up of its captive mine and higher procurement from OMC, replacing more expensive imports,” said Shweta Dikshit, the lead metals and mining analyst at brokerage Systematix Group.

While the company may have to pay higher prices to OMCL as sourcing volumes increase, OMCL bauxite remains cheaper than imports. Therefore, the savings from reduced import dependence should more than offset the higher domestic procurement costs, she said.

Vedanta did not respond to Mint’s request for comment.

Beyond Sijimali, Vedanta has also secured the Karlapat bauxite block in Odisha, for which its subsidiary Bharat Aluminium Co. (Balco) was declared the preferred bidder. The acquisition is intended to secure raw material for the company's planned expansion of its aluminium smelting and alumina refining capacities.

Balco offered a 175% auction premium for the Karlapat bauxite block. The bid was the highest premium offered for a bauxite block auction in India, Mint reported on 7 August.

The company is also looking to increase its captive bauxite contribution from around 40% currently to 75% by the end of FY27, supported by the ramp-up of its mines and expansion of OMCL's supply, said Agarwal.

The push for backward integration is central to Vedanta's ambition to lower its hot metal production cost to around $1,550 per tonne, from roughly $1,710-1,720 per tonne in the first half of FY27. The company estimates that higher captive alumina production and domestic bauxite sourcing could lead to $100-125 per tonne in cost savings.

However, operationalising the Sijimali mine will depend not just on regulatory clearances but also on securing the cooperation of local communities.

“So, just to mention that bauxite production mining is simpler than coal mining because the stripping is very less and you have to mine from the surface. The concern is managing the villages and the local stakeholders. So we are currently on that part of the journey. We have done the approvals, the government approvals have come in place and everything is there,” chief executive Rajesh Kumar told analysts.

Kumar said the company was engaging with villages and local stakeholders to help them understand that there will be more development along with mining activities, describing this as the key challenge in operationalising the mine.

Vedanta Aluminium Metal is one of the largest units formed from the split of Vedanta Ltd into five separate listed companies earlier this year. The company reported a profit of ₹12,784 crore during the first half of FY27, more than double the same period last year, amidst an upcycle in aluminium prices.

Shares of Vedanta Aluminium have lost nearly a fifth of their value since their BSE debut in June, closing at ₹375.45 on Friday and valuing the company at ₹1.47 trillion.

Dipali Banka is a Mumbai-based journalist who treats corporate reporting less like a beat and more like a puzzle to be solved. This invariably means she has to read through annual reports and speak with leaders and analysts. She tracks policies, deals, and the pulse of industries spanning metals, mining, paints, and cement, alongside aviation. She started out as an intern at The Statesman and then completed her postgraduate diploma in journalism from Asian College of Journalism, Chennai, in 2025. Relentlessly curious at heart, Dipali is driven by the simple urge to understand how things work and who they impact. Armed with an enduring fascination for steel and aeroplanes, she moves through the churn of daily news with focus, turning complexity into clarity without losing the story. She is particularly committed to shaping numbers into objective narratives, having little appetite for vagueness that gets in her way.<br><br>Outside the newsroom, Dipali is an unapologetically loud presence who values long conversations and longer walks to unwind. She devours books of all kinds and can often be found indulging in the lyrical sway of contemporary ghazals. She ardently believes that her relationship with her bylines is more sacred than it would ever be with anyone across the human race.

Nehal chronicles India’s top conglomerates for Mint. From navigating the complexities of big-bang mergers and large-scale fundraises to decoding high-profile recruitments and seemingly inexplicable corporate pivots, Nehal focuses on unpacking the long-term strategies of the country’s most influential business houses. He aims to provide readers with a clear-eyed view of how these corporate titans shape the broader Indian economy.<br><br>His professional journey began at The Economic Times in 2018, where he spent over five years before joining Mint in 2023. Over his career, he has tracked diverse sectors like automobiles, metals, cement, power, infrastructure, and renewable energy. He also keeps a close watch on the intricacies of corporate finance and corporate governance. This wide-ranging sectoral experience allows him to better understand India’s large conglomerates that sit at the confluence of these vital industries.<br><br>Nehal studied mechanical engineering from the Pune University and graduated with distinction in 2017. Driven by a passion for storytelling, he pivoted to journalism immediately after, attending the Asian College of Journalism in Chennai. While his time in the newsroom has made him a healthy sceptic, his engineering roots keep him perpetually inquisitive about how things work—and why they fail.<br><br>He actively encourages readers to reach out for feedback, collaboration, or news tips. Nehal can be reached via LinkedIn or directly at nehal.chaliawala@livemint.com.

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