By Arun Bhatt* in Bhubaneswar, January 30, 2019: Even as the curtains go up on the 7th International Aluminium Conference (INCAL-2019), being held in Bhubaneswar under the aegis of the Aluminium Association of India (AAI), there is a new found air of hope and confidence amongst the aluminium producers. Dr Tapan Kumar Chand, CMD NALCO and one of the architects of this conference that has attracted almost a thousand delegates from India and abroad, has declared that Odisha will become the Aluminium capital of the country.

Is it just a morale boosting pre-conference hype or has the domestic industry indeed geared up for a growth trajectory with its “Aachhe din” round the corner? This clearly calls for a deeper analysis.

India’s meager production of less than four million tons per annum and a per-capita consumption of less than two kilograms clearly underline the difficult journey the producers have had till now. On the flip side it shows that the potential for Aluminium demand to grow is immense.

China, for example, produces in excess of thirty million tones and the developed world has a per-capita consumption of more than fifteen kilograms. With India’s GDP growing at around 8%, Aluminium consumption is poised to grow at almost 10% annually. Secondly, the prices of Aluminium at the London Metal Exchange (LME) have remained stable and analysts are of the view that there will not be a substantial fall in prices in the near future. While these are confidence boosters there is a huge downside as well.

The immediate pin prick that domestic producers have to face is the rise of aluminium imports into the country. It is indeed a matter of grave concern that more than 50% of India’s domestic consumption of aluminium is being met through imports. The domestic players have been lobbying for years with the Government to increase the import duty on the metal but there has been no positive response on this issue.

The dichotomy here is that while the Indian primary producers have made the necessary investments to fulfill 100% of domestic demand and are unable to sweat their assets fully they are also forced to export and watch helplessly as China and the Gulf countries take over 50% of Indian Aluminium market. The main reason why the Government is in dilemma is that this move is opposed by the secondary producers who bring in the aluminium scrap from abroad, which comes in much cheaper, to make their end products.

The second major issue is the question of bauxite availability. While NALCO and Hindalco have captive mines, Vedanta continues to be unfairly disadvantaged on this issue after Niyamgiri mine got nixed by NGO activism. What has made things difficult for Vedanta are the changes made in the MMDR Act which now allows new mines to be given only through the auction route.

While this transparent process is, by and large, welcomed by the industry the problem here is that during the last four years not a single bauxite mine has been brought up to the auctioning table. The biggest roadblock to auctioning is the fact that the exploration policy and scientific geological mapping of our bauxite reserves is progressing at a painstakingly slow pace.

Availability of coal too has become a bone of contention. Aluminium smelting requires huge amount of power for which all the producers have set up Captive Power plants. Odisha which is home to India’s 25% of coal reserves produces around 140 million tons annually. The total demand from the state’s independent Power Producers (IPP) and Captive Power Producers (CPP) is around 80 million tones. This includes the demand from Steel, Cement and other products. Yet most of them face coal shortages and in many cases have to resort to costly imports.

If indeed Odisha wants to become the Aluminium capital of the country then these problems have to be fixed on priority. While the existing aluminium producers somehow manage with these adversities what it basically does is that it deters new players to come to Odisha and invest. It does little justice to the Indian aluminium scenario that there are only three major producers in a country that boasts of huge bauxite and coal reserves. Hopefully the conference highlights these challenges before its enlightened audience.

*The writer is former Head of Corporate Communications, Vedanta Aluminium and can be contacted at <mr.arunbhatt@gmail.com>