By Kunal Bose
Why need to Dharmendra Pradhan, who holds charge of the Union petroleum & all-natural gas and steel ministries, be publicly urging his Cabinet colleague Prahlad Joshi (Union coal and mines minister) to push via the extended-deliberated expansion of the central-government-owned National Aluminium Company (Nalco)? (Nalco comes below the mines ministry.) The answer is not far to seek. From the production of bauxite to creating of alumina and its smelting into aluminium metal, Nalco has all of its operations centred in Odisha. The eastern state has the biggest share of the country’s bauxite sources, as also of some other minerals.
Pradhan is credited with the BJP’s meteoric rise in Odisha more than the final handful of years. The party won eight of the 21 Lok Sabha seats in 2019 against 1 in 2014. More significant, its vote share rose impressively to 38.4% from 22% throughout this period. Pradhan is nicely conscious of the emotional attachment of Odisha’s persons to the state’s iconic aluminium venture. In the early 1980s, when the central government set up the aluminium venture, with technologies from Aluminium Pechiney of France that was subsequently taken more than by Alcan of Canada to ultimately come to be element of Anglo-Australian mining giant Rio Tinto, Odisha (then Orissa) was hardly on the radar of the private sector. Nalco caught the imagination of the typical man in the state as it stands out as an instance of how harnessing of a locally-identified all-natural resource for worth addition in various stages could generate wealth and substantial employment, straight and indirectly.
At the identical time, even though the PSU has ownership of higher-alumina-content bauxite in abundance and the advantage of superb logistics, such as practically expense-absolutely free transfer of the mineral from the hills of Panchpatmali at Koraput district to the alumina refinery at Damanjodi via a 14.6 km extended conveyor belt, it has so far not displayed the initiative that will support it to catch up with the other two sector constituents, namely, Hindalco and Vedanta Aluminium, in terms of capacity developing and improvement of worth-added merchandise (VAPs) that are not as exposed to value fluctuations at the London Metal Exchange (LME) as a major metal. Being a politician, Pradhan could nicely really feel the well-known aggravation with Nalco not delivering on its development promises.
Joshi admits that there remains “a huge scope for stepping up the per capita consumption of aluminium in the country” underpinning the want to make new smelting capacity. The challenge for sector entities is to leverage the country’s wealthy endowments of bauxite and non-coking coal. According to the Indian Bureau of Mines, the nation has bauxite sources of 3.896 billion tonnes, such as proved reserves of 656 million tonnes. That Odisha will continue to be the epicentre of India’s aluminium industry—since it alone holds 51% of India’s bauxite resources—is taken for granted. Andhra Pradesh, with ownership of 16% sources, hasn’t been capable to come to be an aluminium centre mainly because repeated, violent agitations have scuppered efforts.
The country’s measly per capita aluminium consumption of 2.5 kg stands in stark contrast to the international typical of 11 kg and 24 kg in China. As per Niti Aayog, lifting India’s per capita use to the international typical will demand an further annual aluminium use of 16 million tonnes. That will make India the second-biggest customer of the metal following China. India presently has an aluminium smelting capacity of 4.1 million tonnes. During 2019-20, metal consumption was down 6% to 3.72 million tonnes.
Even though the sector right here has the capacity to meet the neighborhood demand, except for some particular alloys and VAPs, 2019-20 imports at 2.17 million tonnes—facilitated considerably by our absolutely free trade agreements with ASEAN nations via which China is typically suspected to be re-routing the metal and foreign-origin scrap arrivals at incredibly low customs duty—have forced our producers to come to be extremely export-dependent. This, nonetheless, functions to their disadvantage mainly because LME-linked neighborhood aluminium costs involve freight and import duty.
The government is nicely conscious of the issues triggered by higher levels of import that, a couple of years ago, involved foreign exchange outgo of $5.5 billion or 1.1% of India’s total imports expense. Braving the import-connected challenges and land acquisition challenges, Hindalco and Vedanta have constructed substantial greenfield smelters. Commissioning of new smelters has taken the capacity of Hindalco to more than 1.3 million tonnes and that of Vedanta to 1.75 million tonnes. Hindalco continues to enrich its VAP portfolio by committing increasingly bigger quantities of major metal to the creating of flat rolled merchandise, foils and extruded things. VAPs give substantially superior EBITDA than smelted aluminium. After acquiring 51% of BALCO in 2001, Vedanta raised its smelting capacity to 600,000 tonnes from 345,000 by commissioning a new smelter.
Pradhan’s disappointment is that even though Nalco has for extended been speaking about developing new substantial smelting capacity to take its capacity to more than 1 million tonnes, the corporation has remained stuck with a 460,000 tonne smelter and a 2.275 million tonne alumina refinery even though it has sufficient bauxite sources to assistance substantially bigger operations. From developing a greenfield smelter either in a West Asian nation or in Indonesia by transporting alumina from the Damanjodi refinery to producing 1 at a new website in Odisha, Nalco had regarded as various selections more than the previous lots of years, but all came to a naught.
Joshi has now invoked the ‘Aatmanirbhar Bharat’ vision to say that Nalco will invest Rs 30,000 crore by 2027-28 so that the corporation when once more secures its “rightful place” in the aluminium sector. The two most significant elements of Nalco’s improvement programme would be 500,000 tonne brownfield expansion of Angul smelter and installation of a new stream at Damanjodi alumina refinery that is anticipated to give an additional 1 million tonne capacity. Expansion in Angul, along with upping of amperage of the current 4 potlines, will make Nalco an more than-1-million-tonne aluminium unit.
The government has reinforced Nalco’s raw supplies safety by allocating of bauxite and coal deposits from time to time. All Indian smelters getting run on coal-fired electrical energy have larger energy expense than the ones in West Asia that are primarily based on electrical energy derived from gas or in nations exactly where hydel energy is readily available aplenty. Nalco’s power expense will come down when it begins drawing coal from Utkal D and E blocks. Allocation of the 75 million tonne Pottangi bauxite deposit will be supportive of refinery expansion.
The corporation has a quantity of VAP projects, such as an aluminium park in the pipeline. A man of handful of words, Nalco’s new chairman Sridhar Patra has a large task—to make sure project implementation gains pace.
A former FT correspondent, the author is now India Correspondent of Euro Money publication Metal Market Magazine