Vedanta Ltd may have to shut down iron ore production by the end of the calendar year, if the Goa government does not increase the production cap of 5.5 million tonnes per annum.

“We were producing about 8 million tonnes a month till the monsoon season started, so we will come against our cap by the end of this calendar year. We look forward to the Goa government to lift the cap otherwise we would have to shut down production and that is not good for anybody,” Tom Albanese, Chief Executive Officer of Vedanta Resources Plc and Vedanta Ltd, told BusinessLine .

The company restarted production almost a year ago, after it was shut for over three years due to a ban imposed by the Supreme Court. The apex court partially lifted the ban last year with an iron ore production limit of 20 million tonnes from mines in Goa.

Due to this cap, the Goa government put a production limit of 5.5 million tonnes per annum on Vedanta’s operations. Prior to the ban in 2012, the company’s peak production was nearly 12 million tonnes.

“We are still fighting to regain the share in the international market that we lost four years ago so we would like to continue to produce through the year at the rate of nearly a million tonnes per month. Therefore, we would like the cap to be sufficiently higher and then get off to a good start in 2017-18,” said Albanese.

Protection for aluminium Besides a higher cap for producing iron ore from Goa, the company is also seeking some protection from imports for its aluminium business in India.

The company has ramped up capacity of its aluminium production to around 50 per cent by March 31, on the back of improved prices of the metal on the London Metal Exchange.

“I still think that the prices on the LME are higher than they should be. It is driven by the fact that at this price Chinese production will be incentivised. They have 10 million tonnes of unutilised capacity as we speak. If they decide to turn that on, the market is going to be India and we will have a double hit… we have two very important activities, one is to keep our costs down and second is to work with the government to ensure there is some sort of protection,” said Albanese.

He added that the company aims to raise capacity utilisation of the aluminium business to 75 per cent by the end of the current fiscal and to 100 per cent in the 2017-18.

“While we are satisfied with the progress of our ramp up in aluminium, we are cautious about the future direction of aluminium prices and what China’s response could be. Also, in the long term, our business model of buying bauxite from West Africa to smelt in Odisha is not the right one. It does not make economic sense. We want to find a long-term solution,” he added.

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