AP reaches out to RAKIA for out-of-court deal in  Rs 1,100 crore arbitration 

VIJAYAWADA: As the second phase of the international arbitration raised by Ras-Al-Khaimah Investment Authority (RAKIA) over the cancellation of the bauxite supply agreement (BSA) between AP Mineral Development Corporation (APMDC) and ANRAK Aluminium Ltd is coming up for hearing in November last in London, the Andhra Pradesh government has reportedly approached RAKIA with the hope of reaching an out-of-court settlement.

Sources in the Mines department informed TNIE that the Centre, which made it clear that it has nothing to say on the arbitration, suggested that the State government take initiative to resolve the issue outside the court. It is learnt that RAKIA, which has only 13 per cent stake in the alumina refinery near Makavarapalem in Vizag Agency, is seeking Rs 1,100 crore as compensation. 

“Besides the Centre, we are also of the view that the chances of winning the case are less as due procedures were not followed while entering and cancelling the agreement. During the first phase of the arbitration, we invoked the force majeure clause (i.e. certain events, beyond the control of the parties, may inhibit the parties from fulfilling their duties and obligations under the project agreements) citing the Maoists killing three persons to oppose the bauxite mining in the Visakhapatnam agency areas ,” the sources said. “However, as invoking the force majeure clause sends an indication that Andhra Pradesh is not a peaceful State and it has law order issues, we were forced to give up the arguments in that direction. We may win the case by bringing up the clause, but may lose the confidence of investors in ‘Brand AP’,’’ the sources observed.

Stating that the government may offer around Rs 300 crore to Rs 400 crore to RAKIA for settling the issue, the sources added Penna Group, the major partner with 87 per cent stake in the alumina refinery, may pay back the amount to the State government and own the refinery as a whole.RAKIA and Penna Group jointly set up the alumina plant in Vizag agency area based on the agreement with the APMDC to get bauxite from the agency area. 

However, following the State government cancelling the bauxite mining agreement after imposing a ban on bauxite mining in the State, RAKIA went for international arbitration to get compensation.APMDC Vice-Chairman and Managing Director VG Venkata Reddy confirmed that the State government wants to settle the issue outside the court.“We have sent proposals for mediation before the issue coming for hearing in the International Arbitration Court in November last week and are hoping to resolve the issue amicably,’’ Venkata Reddy told TNIE.