 "Enough value added in alumina to justify exports?")
In Piyush Goyal, aluminium makers have found a mines minister with a clear vision of where he wants to see India’s largest non-ferrous metal industry in the next decade and beyond. Maybe over-optimistic by a long margin, New Delhi had earlier given the steel industry a capacity target of 300 million tonnes (mt) against 115 mt at present. Goyal does not believe that in the intermediate product, alumina, derived from bauxite, there is sufficient value-addition to justify its export. What he finds baffling is while India has remained a large exporter of alumina since the government-owned National Aluminium Company (Nalco) was started nearly three decades ago in Odisha, the Indian aluminium industry continues to import the smelter feedstock.
At least one big producer of the silvery white metal cannot run its smelter at Jharsuguda in Odisha, which incidentally is among the largest single-site units in the world, without imports of alumina. Unlike its peers Hindalco and Nalco, Vedanta Aluminium — in the absence of ownership of bauxite mines and the Odisha government’s failure to honour its bauxite supply commitment so that the company is able to run its Lanjigarh alumina refinery to capacity — is in constant struggle to procure bauxite and alumina from multiple domestic and foreign sources.
This puts Vedanta at a cost disadvantage as a producer of alumina. Vedanta Aluminium chief executive officer Abhijit Pati says: “We are able to almost make good what we lose at refinery point because of our high levels of smelter efficiency.” Quite a few things go to the credit of Nalco, including the operational efficiency that runs through its value chain from bauxite mining to metal smelting. But, Goyal does not want Nalco to rest on its laurels. He wants the company to come out of the comfort zone of staying put at a smelting capacity of 462,000 tonnes. What does not find favour with him is Nalco exporting around 1.2 mt of alumina out of a production close to 2 mt in 2015-16. In Nalco’s scheme of things, exports have a much bigger share of alumina production than its use by own smelter. If what Goyal has in mind for Nalco sees the light of day, then Nalco’s present exportable surplus of alumina will all come for local smelting.
While recently asking Nalco to prepare a road map that will take its capacity to 2 mt, Goyal said the company “is exporting alumina while ironically the country keeps on importing it. We must use the smelter feedstock within the country to overcome such a scenario.” The task that the minister has set for Nalco is to say the least onerous. But, this finds resonance in Vedanta group chairman Anil Agarwal’s forecast that “going ahead, India will have to have aluminium smelting capacity of 20 mt against the present 4.1 mt. As Indian industry gains in sophistication, the white metal will meet demand surge from sectors ranging from electrical to transportation and from defence to aerospace. India, having the world’s seventh-largest bauxite reserves and fifth-largest coal deposits, is the ideal place to make aluminium.”
To be fair to Nalco, the company, for many years since 2009, was in pursuit to build a 500,000-tonne aluminium smelter and a 1,200-megawatt power complex at Jharsuguda in Odisha. Jharsuguda was considered an ideal location for its proximity to coal-rich Ib valley (Jharsuguda). But, the Rs 16,000-crore Nalco project failed to get environment clearances as Vedanta and Hindalco had earlier secured permissions to build smelting capacity of 2 mt at Jharsuguda. The National Environmental Engineering Research Institute said housing of smelting capacity beyond 2 mt would be environment-damaging for the region. Knocked out of Jharsuguda, Nalco should be looking for an alternative site at Sundargarh, Sambalpur, and Balangir, all in Odisha. On the premise that Nalco should ideally have a smelter in a country where the cost of power is less than in India, it hopped from South Africa to Indonesia to a number of gas-rich centres in West Asia in search of the right site and a reliable local partner. But, success has eluded Nalco. Let’s see what comes out of Nalco’s proposed business cooperation pact with Iranian Mines and Mining Industries Development and Renovation Organization.