Introduction:

Covid-19 has spread to 211 countries, since its Outbreak in Wuhan in China, forcing imposition of lockdowns which have created much socio-economic disruption. Global losses are pegged at $9 trillion, and India is losing Rs 35,000 crore every day. This will adversely impact the entire metal industry, especially the world’s second most important metal, aluminium.

Body:

Status of Aluminium industry in India:

• Aluminium Industry is the second most important metallurgical industry in India.
• Aluminium has gained popularity as a substitute of steel, copper, zinc and lead.
• Some of its unique properties like lightweight, recyclability, conductivity, non-corrosiveness and durability have helped establish it as a metal of choice for various applications across   various   segments   of   the   manufacturing
• Aluminum is also called ‘the Metal of Future’ due to the above properties.
• There are 8 aluminium smelting plants in the country located in Odisha (Nalco and Balco), West Bengal, Kerala, Uttar Pradesh, Chhattisgarh, Maharashtra and Tamil Nadu.
• Aluminum Consumption in India at 2.5kg per capita is much below the global average of 11kg per capita.
• Globally, auto & transport account for 23% of aluminum consumption, followed by construction (22%), packaging (13%), electrical (12%), machinery and equipment (8.5%), consumer durables (4.5%), and other segments (4%)

Prospects:

• The aluminium industry has a high multiplier for job creation. Every job in primary production creates two more in the downstream and upstream industries.
• The industry provides livelihood to over 8 lakh people and every 1 mn tonne addition creates an additional 2 lakh livelihood opportunities.
• Even at its low consumption, aluminium contributes 2% of manufacturing GDP (steel 12%, cement 9%) and provides nearly 800,000 jobs.
• This growth is critical for India’s vision of achieving 25% of GDP from manufacturing by 2022.
• Aluminium is the most apt industry for creating livelihoods to achieve the coveted V-shaped recovery from ~2% to ~7% by next year.
• It will be a key contributor to ‘Make in India’, National Capital Goods Policy, setting up of smart cities and the goal of 100 GW solar capacity by 2022.
• A country’s over-reliance on foreign imports for essential strategic metals may be detrimental towards the objective of economic and national security.
• Many industrialised nations have included non-ferrous metals/aluminium industry as a strategic sector in their industrial strategy.
• The U.S. Department of Defense considers aluminum a strategic metal for maintaining effective military capabilities
• Given its high availability in India, it would greatly contribute to economic growth
• If properly utilized, many backward States can become financially healthier, leading to development
• China is a leader in solar equipments which use high quantity of aluminium. It is used in wind farms too. Given India’s ambitious INDCs, aluminium remains a key metal with its importance increasing day by day

Problems:

• With a gloomy global forecast and Chinese smelters continuing operations, there will be an inventory glut. End-users are cancelling contracts for primary aluminium in Europe and North America, contracting demand by 5 mn tonnes.
• India’s GDP forecast falling to 2% (from 6%) will impact aluminium demand in the construction, transport, and electrical sectors. Aluminium demand will decelerate by 40-50% unless enough stimulus is given—an SOS call of the aluminium industry.
• Global recession, shrinking markets in the western hemisphere, and semi-finished products through FTA countries like Malaysia and Thailand spell trouble for Indian aluminium exports.
• Dumping of aluminium into India by China has posed a serious risk to the domestic industry. China provides very cheap power and various subsidies to the industry, which India cannot afford to provide at this moment
• Even if various import duties are levied, aluminium imports are recalibrated as semi-furnished products, nullifying the effect of duties
• India’s own aluminium consumption will recover slowly post FY22, to reach ~6-7 mn tonnes by 2025.
• Aluminium industry is also affected by poor infrastructure in India when compared to leading producers across the world.
• Lack of availability of cheap power in the country
• Internal problems like labor unrests, environmental regulations and tribal issues like Dongria Kondh of Niyamgiri vs Vedanta Resources

Measures needed:

• Tariff support recommendations for aluminium MSMEs:
  • Immediately impose minimum import price and/or quantitative restriction on imports safeguard our MSMEs from cheap imports by increasing import duty
  • To be globally competitive, enhance the MEIS scheme from 2% to 5% for all aluminium products under Chapter 76, and implement the RoDTEP (remission of duties or taxes on export products) scheme expeditiously.
• Financial measures:
  • Extend RBI’s moratorium to non-convertible debentures and other commercial papers, for both principal and interest
  • Waiver/moratorium on all statutory payments (electricity duty, royalty on coal and minerals, coal cess, and on renewable purchase obligation) for next two years, to support highly power-intensive industries like aluminium.
• Role of industries:
  • Industry, along with the government stimulus, should promote MSMEs and downstream industries.
  • Aluminium parks developed by Nalco and Vedanta will increase value addition, mentor MSMEs, lending brand names to market end products.
  • Other industries can also introduce cashless model for MSMEs to give input material and buy back end-use products.
  • This will be mutually beneficial—spreading industrialization, creating employment, and developing MSMEs.

Conclusion:

India’s growing economic might enables it to produce enough high-quality aluminium to ensure self-reliance in defence and critical infrastructure, and avoid global volatility in supply and prices. A National Aluminium Policy will be an important step forward. With all ingredients of competitive raw material availability (bauxite and coal), best-in-class manpower, and value addition through MSMEs, India has the potential to be self-sufficient and become a global manufacturing hub of aluminium, and can be a strong substitute to China.