Arun Bhatt
Trapped in a pincer of rising coal prices and flooding of cheap imports, domestic aluminium industry needs government policy support to come out of this crisis.
During the last four years Indian aluminium producers have made investments of Rs 1.2 lakh crore to enhance total domestic capacity from 2 MTPA to 4.1 MTPA, with a total debt on the industry at Rs 70,000 crore. The installed domestic aluminium capacity in the country stands at 4.1 million tons/annum against the current domestic demand 3.3 million tonnes/annum implying that there is sufficient domestic capacity to cater 125% of India’s aluminium demand.
Yet, the distressing fact is that 50% of Indian Aluminium consumption is being met through imports mostly from China and Gulf. What is even more revealing, and damaging to the cause of Make in India Aluminium, is the fact that 50% of these imports constitutes of “scrap” which attracts lesser duties. This clearly is crippling the domestic aluminium industry.
The relief that the ailing Indian Aluminium Industry was supposed to get from the upswing in global aluminium prices (LME) has been marred by increasing production costs over the past few quarters in FY 17-18. Despite the LME prices swinging on a record high in this current period, the domestic industry continues to reel under increasing input costs.
In the past couple of years, the production costs of the metal has significantly increased due imposition of various cess and increased duties, along with substantially increased input costs and escalated prices of critical raw materials like Coal, Alumina, CP Coke, Caustic Soda etc. with associated logistic costs. These have adversely impacted primary aluminium making costs, thereby depriving the domestic producers to capitalise on the favourable market opportunity.
The increase in input costs by $730/MT completely offsets the increase in aluminium LME price ($251/MT)
Particulars | Previous | Current | Sp. Consumption/ MT of Aluminium | Impact on Aluminium COP ($/ MT) |
Cess on Coal1(introduced in 2010) | Rs 50/ MT | Rs 400/ MT | 11.73 MT | $64/ MT |
Coal Prices2 (Import/ Spot Auction) | Rs 2400/ MT | Rs 3900/ MT | 11.73 MT | $247 /MT |
Electricity duty3(increased in Odisha) | Rs 0.30/kwh | Rs 0.55/kwh | 14500 kwh | $56/ MT |
Renewable Power Obligation (RPO) | Nil | 3% for Solar 4.5% for non-solar | 14500 kwh | $20/ MT |
Evacuation Facility Charges4 on Coal by Coal India | 0 | Rs 50/ MT (w.e.f. 20.12.2017) | 11.73 MT | $9/ MT |
Alumina5 | $271/MT | $400/MT | 1.92 MT | $248/ MT |
CP Coke | Rs 19,829/MT | Rs 26,122/MT | 460 kg | $43/ MT |
Import Duty on CP Coke6 | 2.5% | 10% | 460 kg | $15/ MT |
CT Pitch | Rs 24,974/MT | Rs 40,645/MT | 110 kg | $27/ MT |
Caustic Soda7 | Rs 29,281/MT | Rs 35,935/MT | 200 kg | $21/MT* |
Total Impact | $730/ MT |
A declining trend in the domestic market share is also a grave concern for the Indian Aluminium Industry. According to the Aluminium Association of India (AAI),
The Aluminium Association of India (AAI) looks forward to Government support through the following measures:
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