Vedanta arm Balco puts 1k staff on notice

The closure comes in the backdrop of a crash in global aluminium prices and the prohibitive cost of coal to run power plants

Bharat Aluminium Company Limited (Balco), a subsidiary of Vedanta , has started the closure procedure for its sheet-rolling division and foundry at Korba in Chhattisgarh. The shutdown of the rolling division is part of a restructuring exercise by Balco, which will result in loss of around 1,000 direct and indirect jobs, the company said.

It issued the information to the Chhattisgarh’s labour secretary, the BSE and National Stock Exchange. “Balco has sought permission from the Government of India to close the unit by December 8. The closure will be as per the provisions laid down in The Industrial Disputes Act, 1947,” it said.

“The closure of the rolling mill is in the backdrop of a crash in global aluminium prices and the prohibitive cost of coal to run our power plants. Worldwide, there has been a fall in energy cost but for Balco, the absence of linkage coal and regulatory issue for starting our coal mines is making operations economically unviable,” said Ramesh Nair, chief executive, Balco.

SHUTTING DOWN ROLLING DIV IN CHHATTISGARH

• Balco started the closure for its sheet-rolling division and foundry at Korba in Chhattisgarh
• It is part of a restructuring exercise, which will result in loss of around 1,000 direct and indirect jobs, says the company
• Although aluminium prices have plunged globally, power costs are rising in India, making the cost of production unviable for manufacturers
• Balco requires 30k mt of coal to operate at peak capacity

Although aluminium prices have plunged globally in the past few months, power costs are rising in India, making the cost of production unviable for primary aluminium manufacturers. To operate at peak capacity, Balco requires 30,000 million tonnes (mt) of coal. While the coal auctions have benefited the company in terms of allocation, the new block will meet only 10 per cent of the peak capacity.

Aluminium prices in the global market have fallen sharply from $2,200 a tonne at the beginning of 2015 to $1,600 in the current month, making exports unviable. In India, cheap aluminium from China and West Asia has shrunk the market share of domestic aluminium producers, who are already struggling with rise in input cost.

A staggering 55 per cent of domestic aluminium consumption is met through imports, forcing domestic players to operate at only 50 per cent of their installed capacity.

“Due to non-availability of bauxite and coal, the two basic raw materials used in the aluminium and power complex, Balco is now sitting on idle capacity. The company’s current coal requirement of 15,000 mt to operate its power plants is being met partly by auctioned coal and partly by imports,” said the company.

The Chotia Coal Mines, which the company bagged in the recent auction, is yet to be operational due to pending government clearances.

“The new 1,200-Mw power project, which was given clearance recently, is also struggling due to paucity of coal. On aluminium front, lack of local bauxite and dependency on imported costly raw material is making the company’s produce non-competitive in the market,” the company added.