 "Tom Albanese")
The right place to build aluminium smelters is where bauxite, coal and capital are available, Vedanta Resources Chief Executive Officer Tom Albanese tells Kunal Bose. Ideally, there should also be an expanding local market for the metal. Albanese says India has it all. Edited excerpts:
Your chairman, Anil Agarwal, says India has abundant natural resources and demand potential to lift annual aluminium smelting capacity to 20 mt from 4.1 mt. Is he not too optimistic, since a lot of local capacity now remains idle?
The question is, will demand be there in future to support that kind of capacity build-up? For local demand of 20 mt, we have to have a very long-term perspective, pitched on multiple decades of eight per cent annual gross domestic product growth. Now, the issue is: From where will India get that big a volume of aluminium? Will it buy the white metal from China, which has around 50 per cent share of world production or will there be big enough indigenous capacity to take care of growing demand? I will say local aluminium demand growth stands to get a major boost from the Make in India programme and the renewed emphasis on infrastructure development.
What gives you confidence that India could build that big a capacity?
You require bauxite, cheap energy and capital to build smelters - all in large volumes. India is rich in geological endowments of coal, which, if properly harnessed, becomes a cheap source of electricity and bauxite that is refined into alumina for smelter use. What you don't have often here is social sanction to open mines and build alumina refineries and smelters. So, the challenge is to break that logjam by upholding the best practices from social and environment perspectives.
India has bauxite resources of 3.5 billion tonnes (bt). But, as Vedanta itself has experienced, a reserve is identified for you by the state and then when you go to open the mine, you meet with resistance from indigenous people and non-government organisations , resulting in project abandonment. Will you agree a precondition to bringing natural resources into the production stream requires a time-consuming exercise to bring all stakeholders on the same platform?
Most bauxite reserves are near the local areas and not on the local areas. So, that's no different from iron ore or copper ore reserves. The point is, you have to find social solutions to open new mines. Unfortunately, bauxite mining in the country has been politicised. What I would like to do is to break that jinx. NGOs want social and economic development of communities living around mine sites. So, you judge the miners by social programmes embracing health care and education and local infrastructure development that we fund and support.
What about NGOs with a non-development agenda?
Whatever they may be up to, we have to engage with all NGOs. Whether you are in India or in Belarus, you will come up against walls when you try to do a project.
Aluminium smelters here are all run on coal-fired electricity. Environmentalists find burning of coal to produce the metal nature-degrading. Can you prove them wrong?
India is very strong on coal with resources of around 300 bt. I would not rule out coal in any way from the country's energy space. At the same time, mining has got to be of world-class and thermal power plants will have to go on reducing their carbon footprints. Transformation has to come by way of technology induction on a continuous basis and use of best practices. A lot of power is needed to make aluminium, often described as 'frozen electricity'. We need low-cost power to be a competitive aluminium producer. For the sake of the environment, power and its use have got to be clean.
How can aluminium in its present depressed state attract new capital?
Let me give an example. Vedanta now has 1.3 mt of unused smelting capacity in India. To attract further new capital, we have to first start using that capacity and also make money on the investment. To give a shot to white metal demand and make fabrication cost-effective, I want to build aluminium parks around our smelters in Odisha's Jharsuguda and Chhattisgarh's Korba. My experience is that the most efficient fabricators are located next to smelters. Since the molten metal from smelters is transported to the next-door aluminium parks, fabricators are spared the big reheating cost.
Should India build smelters in West Asia?
In some countries, you get the right combination of low-cost power and access to capital. But, the first thing you miss there is bauxite. You also don't have any significant local market for aluminium. So, if you are a producer there, you have to bring bauxite from West Africa or somewhere else and find major export outlets. West Asia is now facing a net heavy oversupply of aluminium. Ideally, a smelter should be next to bauxite and coal mines and the market. India fits that bill.
