Hindalco scoffs at mine profiteering charge

Has Hindalco Industries’ lease for Odisha’s only operational private coal mine been a bonanza or a carefully husbanded and now depleting asset?

According to the state mining department, the company has so far excavated about 16 million tonnes from this one, at Talabira in this district. If the calculation of operating margin at Rs 295.41 per tonne of coal indicated in the report of the country’s Comptroller and Auditor General (CAG) is taken as reference, Hindalco made a financial gain of Rs 466 crore.

However, the bonanza, if it is one, is set for an early end. “We had started mining at Talabira in 2003 and the residual deposits will cater to our need for the next three to four years only,” says Subir Mukhopadhyay, head, human resources, and spokesperson of Hindalco’ s Hirakud aluminium smelter unit, with an installed capacity of 161,000 tonnes of aluminium annually.

Adding: “It is a very small coal mine, spread over 1.7 acres and has only 28 mt of proven reserves. We’re really worried on how to supply 7,000 tonnes of coal per day to our captive power plant at Hirakud (376.5 Mw), about 50 km from the mine, after 2015-16. Though we have stakes in other coal mines, production at those sites are yet to take off.”

The state mining department confirms the estimate, saying Hindalco’s annual requirement is three mt. Electricity is 40 per cent of the cost of making aluminium. Talabira was originally allotted to Indian Aluminium Company in 1994 and later to Hindalco when it acquired majority stake in the former in 2000. For the first three years after start of operations at Talabira, it was producing 500,000 tonnes of coal annually. Later, its mining plan was revised to 1.5 mt per annum; then, in 2010, the Union ministry of environment and forests permitted it to raise annual production to three mt.

Local activists allege 6.8 mt was produced and sold from the captive mine between 1998 and 2001 without necessary clearances.

Nonsense, says Mukhopadhyay. “We cannot think of trading coal, since we are struggling to meet our requirement. It would be foolish to sell coal at a time when we are actually importing coal to meet our need.”

He says the company imported 40,000-45,000 tonnes in both 2010-11 and 2011-12 to feed the Hirakud power plant because of the supply problem in the captive mine. The requirement was expected to grow, as the company plans to step up power generation by 100 Mw to meet the need of capacity addition on flat-rolled aluminium products.

Official records to verify the counter-claims aren’t there. The site office of Hindalco said it did not have the production data till 2008, since the office was burnt down. Records at the deputy director of mines, Sambalpur, shows the Talabira mine to have started production in 2003.

Trade union leader Dwarika Mohan Mishra, who had made the complaint about the company selling coal in the open market in a letter to the state chief secretary, says Hindalco earned much more than Rs 466 crore profit (based on CAG calculations) in the past nine years of mine operation.

“Since the auditors had based their calculations on the production cost during 2010-11 of (government-owned) Coal India Ltd, which spends a lot on manpower and other facilities not applicable to private miners, the profit figure may be more,” he argued.

The company says it has committed Rs 10 per tonne of coal extracted for development of the local community but had to halt some welfare projects due to disputes among surrounding villagers. It is currently providing salaries of teachers in some schools, drinking water facilities and free medical checks in the area around the mine, according to its corporate social responsibility plan.

This is the third instalment of a four-part series

DIGGING DEEP

• 16 million tonnes of coal has been excavated by Hindalco so far from Talabira mine in Odisha’s Sambalpur district, according to the state mining department.
• Rs 466 crore:  If the calculation of operating margin at Rs 295.41 per tonne of coal indicated in the CAG report is taken as reference, this is  the amount of financial gain the company made.
• Talabira was originally allotted to Indian Aluminium Company in 1994 and later to Hindalco when it acquired majority stake in the former in 2000.
• 500,000 tonnes  For the first three years after start of operations at Talabira, this is the amount of coal it was producing annually. Later, its mining plan was revised to 1.5 mt per annum; then, in 2010, the Union ministry of environment and forests permitted it to raise annual production to 3 mt.
• 6.8 mt  is the amount that local activists allege was produced and sold from the captive mine between 1998 and 2001 without necessary clearances, which the company denies.