As reported by industry analysts, it seems that 2026 represents a crucial point in Vedanta’s raw material security as an aluminum company in their efforts to meet delays and challenges from regulations and resistance from local communities.
Vedanta Limited, which is currently considered India’s largest aluminum producer, is trying to stabilize its supply chain for raw materials in the face of increasing uncertainties that may eventually affect its cost base and competitiveness in the market. Over the next few months, addressing these challenges in parallel will help shape the future margins for this firm.
Delays and Civil Unrest at the Sijimali Mine
Vedanta acquired mining rights in Sijimali Bauxite Mine in Odisha in early 2023, which was their first captive bauxite mine in the region. The project was expected to begin production in Q3 FY25, although it faced setbacks due to challenges posed by local villages and legal challenges regarding the genuine consent of the general public.
Even as the Orissa High Court later settled the matter, there were reports of protests. This created an uncertain regulatory environment, which was further exacerbated by the fact that the Central Government temporarily placed the Stage 1 forest clearance, or FC-1, of the proposed project on hold due to fears of protests. Support picked up towards the end of the year when FC-1 was secured on December 31.
Nonetheless, the project still needs environmental approval and Stage 2 forest approval (FC2). Vedanta has already stated the proposed project is expected to start at the end of FY26, but analysts seem dubious due to the tight timeline to execute.
The importance of Sijimali and pressure on the supply chain
The importance of the Sijimali mine to Vedanta Aluminium cannot be overemphasized. With reserve estimates of around 311 million tonnes, and the plant design capacity of 9 million tonnes per annum, the project has the potential to decrease the company's reliance on third-party bauxite imports.
Currently bauxite is further processed at Vedanta's alumina refinery in Lanjigarh in Odisha, which traditionally sourced its requirements from third parties. Presently, a majority of its bauxite is sourced from the Odisha Mining Corporation (OMC), along with imports. Vedanta intends to import 5 million tonnes from OMC in FY26, with supplies of the rest being arranged from abroad.
On the other hand, the Refinery at Lanjigarh is an expansion underway. The alumina capacity of the Refinery, which was 2 MTPA as on FY24, is planned to be doubled from 5 MTPA to 6 MTPA by FY28. The alumina is used to feed Vedanta’s aluminum smelters at Jharsuguda and the BALCO plants, combined capacity of which is 2.4 MTPA, which is expected to be further improved to 3.1 MTPA by FY28.
Since it takes about four tonnes of bauxite to refine one tonne of aluminium, the act of sourcing it from Sijimali would free it from the fluctuations of the spot market because of the breakdown of Vedanta's supply deal with Emirates Global Aluminium due to the suspension of EGA's mining concession at Guinea, leading to the stoppage of imports of 3 million tonnes of bauxite annually.
Legal dispute with OMC and financial implications
Additionally, there is a dispute between Vedanta and OMC on bauxite price. Under a long-term agreement signed in 2019, Vedanta had a right to purchase one tonne of bauxite at a price of INR 673 (USD 7.45) per tonne, and a clause to pay differential rates in case of future auctions.
In August 2020, OMC held an auction with a lower tender price of INR 1,707 (USD 19) per ton, which remained unbidden. Later, OMC sent a demand notice of INR 2.8 billion (USD 31 million) to Vedanta. This issue further went to the Orissa High Court, resulting in an order from the high court allowing supplies with a preliminary rate of INR 1,000 (USD 11) per ton, which, according to the company, reached INR 2,957 (USD 32.75) per tonne at some auctions.
A critical hearing has been set for January 12. A negative judgment could significantly escalate Vedanta’s raw material prices. Vedanta already faces pressure from low margins.
Outlook: Margins Depend Upon Resolution
Aluminium continues to be the biggest contributor to the Vedanta group’s profits, contributing an estimated 45 per cent to the EBITDA of INR 223.6 billion (USD 2.47 billion) in H1 FY26. Noting this on December 16, Kotak Institutional Equities expected the margins to move up to USD 1,210 per tonne in FY28 from the current H1 FY26 levels of USD 943 per tonne, subject to overcoming certain regulatory and legal obstacles.
A look at 2026 and what the future may hold for Vedanta’s aluminium plans, instead of relying on markets, it’s now a function of Vedanta’s ability to tap into available bauxite to make Sijimali not only a mining operation, but a turning point in the company’s future.
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BASUNDE, Rohini（Global PR & Reporter ）
Based in India, Rohini works as a Reporter and Global PR professional,
leveraging her strong background in culture, society, and media studies.
Her work primarily involves article writing and managing global public relations campaigns.
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