Please give the current status of the aluminium industry in India in terms of demand and supply.

For 2014, we estimate Indian primary aluminium supply to be 1.9Mt as against a domestic demand of 1.7Mt. India’s net export of primary metal was almost 185,000 tonnes in 2014. So, the local market is oversupplied in broad terms.
 

What is the present outlook for aluminium in India? In terms of supply, is India self-sufficient?

More of smelting capacity is coming on stream in the country, which is causing a rapid growth in country’s primary metal production. In Q2 2015 itself, Indian primary output has grown 12.7% y/y, in comparison to a consumption growth of just about 6%. We expect the market to remain highly oversupplied in the medium term.
 

In terms of self sufficiency in supply, there seems to be an imbalance. We have ample domestic supplies of primary ingots and wire rods but at the same time, lack sufficient output of billets and primary foundry alloys.This is the primary reason why India imported over 300,000 tonnes of primary metal in 2014. Local producers need to diversify their production by investing in cast houses. We hear that Hindalco has commercialized a homogenizing plant for billet production at its Mahan smelter and will soon start producing wire rods from there. Vedanta is also capable of producing primary foundry alloys from its Jharsuguda smelter.
 

Can you compare the consumption of the aluminium in the country vis a vis consumption in China and other important markets in the World?

In 2014, India consumed 1.7Mt of primary aluminium, as against 27.2Mt in China, 6.3Mt in Western Europe, 5.4Mt in USA, 2.1Mt in Japan and nearly 2.3Mt in the Middle East.
 

Please comment on the technology in the aluminium industry in India? According to you, what are the challenges in the technology side of the sector?

For primary aluminium smelting; all the three majors, i.e. Hindalco, NALCO and the Vedanta Group, invest continuously in renovation and modernisation of their existing facilities and have incorporated the best available technology for their fresh units. So, there is no major challenge on technology side.
 

At present, which industries are the largest business drivers for aluminium? Which upcoming sectors are likely to see increased use of the metal in future?

Electricity infrastructure and automotive sectors are the largest drivers for aluminium demand in India at present.Positive developments in the renewable energy, beverage can packaging and defence segments are likely to aid growth in per capita aluminium consumption in the country.
 

What are your views about the government policies in these sectors? What challenges does the industry face on the policy front?

The biggest challenge for Indian primary aluminium producers is access to quality raw material and fuel sources. Having invested towards fully integrated operations, producers had hoped benefit from ample domestic supplies of bauxite and coal to feed their refineries and captive power plants respectively. However, outdated government policies on mineral mining and land acquisition have resulted in delays in allocation of mineral resources to these companies, thus forcing them to be highly dependent on inconsistent and costly third party supplies.
 

Nonetheless, there have been some breakthroughs on the policy front in H1 2015 (such as coal block auctions and enactment of the revised MMDR law), which we see as a big positive for long term sustainability of the Indian aluminium industry.
 

Kindly discuss your views of the recently announced Foreign Trade Policy and its impact on the aluminium industry.

From a broader perspective, the policy will likely facilitate international trade as it simplifies transaction processing for exports of goods and services. However, specifically in the aluminium sector, Indian primary producers may now have to rethink their export strategy. Over the past 6-8 months, countries in Latin America and Eastern Europe have gained major significance in the Indian primary aluminium export mix. One of the major factors which supported exports to these regions was the duty credit benefit (refund of 4% of the FOB value of exports) which was provided by the Indian government under the previous Special Focus Market Scheme (SFMS).
 

In the new policy, SFMS has been replaced with a broader Merchandise Exports from India Scheme (MEIS) which provides half the reward for exports (2% of the FOB value of exports) compared to that available under the SFMS. It roughly amounts to an increase in cost of imports to the previous Special Focus countries by $40-45/t Al, which is substantial. However, the MEIS scheme includes more countries than the SFMS. For instance, Indian primary aluminium producers will now be able to get a reward for exporting to countries such as Iran and Turkey. Their focus, thus, may shift from faraway locations in Latin America to closer markets in the Middle East and Western Asia.
 

Is the foreign trade agreement hurting Indian manufacturer due to duty free imports of finished goods?

Not as much as these hurt the steel industry. Unlike steel, for which large volumes are being imported from countries such as Japan and South Korea with which India has a free trade agreement (FTA), Indian aluminium imports are predominantly from China and the Middle East, the regions with which we do not have FTAs.
 

Kindly share your opinion on the steps that the government can take to strengthen these industries from policy front.

Expedite auction process for major minerals under the Mineral (Auction) Rules 2015
Promote downstream investments through initiatives similar to the Angul Aluminium Park.