The present pricing structure of Bauxite disrupts auctioning existing mining leases: Nalco Ex-CMD

The pricing structure to calculate the average selling price (ASP) of Bauxite is resulting in various state governments unable to auction the existing bauxite mine leases as companies are finding the prices unviable to participate, said the state-owned aluminium manufacturing company, National Aluminium Company’s former chief managing director, Tapan Kumar Chand.

“Bringing enough bauxite blocks of the estimated deposits of 3.8 billion tons of bauxite in India into the auction and increasing the capacity of existing mines by at least 50% will be key to moving India towards becoming AatmaNirbhar,” Chand said in a press note.

According to the press note since the inception of the MMDR Act 2015, no metallurgical grade Bauxite mine has been successfully auctioned. This is largely linked to the unviable and arbitrary determination of Average Sale Price (ASP) of Metallurgical Grade of Bauxite linked with the selling price of the end product Aluminium.

The price determined from the current ASP system is artificially increased up to 300% to 400% by including expenditures incurred beyond the mining lease, Chand said.

The present pricing structure links the selling price of the end-product (aluminium) to determine the ASP of metallurgical grade bauxite and ends up including costs such as transportation, quality control, rehandling cost and more.

“This will render Aluminium production unviable in the country. A repercussion of this is being seen in the pause of an additional investment of over Rs. 50,000 crore in the Aluminium sector,” Chand said.

One of India’s most abundant ores, to feed the rapidly increasing domestic consumption and has caused a loss of USD $400 million to the Indian exchequer over the past five years, the press note said.

A single developed mine potentially generates over 10,000 jobs and brings in over Rs. 5,000 crore worth of state revenue.

“Modern, sustainable mining methods trigger socio-economic development bringing remote regions into the economic mainstream. Hence, utilizing India’s natural bauxite dividend needs to be a policy priority,” Chand said.