The BL Interview. ‘It will be a shame if India is not a globally competitive metal producer’

The cancellation of bauxite mines and auctioning of coal blocks have come as a bolt from the blue for Hindalco Industries, which is on the verge of sealing a huge investment of about $6 billion in setting up aluminium smelters at Mahan (Madhya Pradesh), Aditya (Odisha) and Utkal (Odisha). The company had to cough up ₹536 crore in the September quarter as additional levy for extracting coal from its mines. The Government has made it mandatory for companies to pay the levy to participate in the coal auction process. Debu Bhattacharya, Managing Director, Hindalco Industries, speaks to BusinessLine on the coal crisis and on the future road map for the company.

With Hindalco placing bids for 15 blocks, how do you perceive the coal auctioning process?

I do not want to comment on the number of bids we have placed, but I can tell you that we have been very selective. I really do not understand why the schedule 2 mines are being auctioned first, followed by schedule 3 and schedule 1. The schedule 2 coal mines are operational and mostly smaller in size. The schedule 3 mines are about six to one-year old, while the schedule 1 mines are unexplored. We would look at all options to secure our energy needs and bid only for those mines which make sense to us.

There is no point in bidding recklessly as the cost of transporting the coal from the mine to factory will play a key role in deciding the cost of power.

We have bid for mines which are relatively closer to our factories.

What is the status of the five Jharkhand bauxite mines which were closed last September?

We have followed the due process, production at these mines should start anytime soon.

Will India be globally competitive in metal production as cost is expected to rise after the coal auctioning?

The final cost of production will depend on various things, including the price at which the coal blocks are allotted, quality of coal and the distance between the mine allotted and the factory. It will be a shame if we are not competitive enough in metal production with such huge reserves of mineral resources and talent pool. The outcome of the entire process will form the basis for the Government’s ‘Make in India’ theme.

Will the ramp-up in production at the recently commissioned Mahan and Aditya aluminium smelters be affected due to coal shortage? Will you consider coal imports?

It will have less impact. We should be able to increase the capacity to optimal level in six months if we are allotted the coal blocks we have bid for.

Right now, we are increasing the capacity steadily at both the smelters.

In fact, higher alumina production at Utkal and aluminium output at both the Mahan and Aditya smelters led to better volumes in the December quarter. Import of coal into Mahan is very difficult as the nearest port is some 1,000 km away.

The High Court has told the Government to remove three coal blocks of Jindal Steel and Power from the auctioning as the end-use status of these mines were changed from steel to power. Do you have a similar case in the Mahan block allocated jointly to Hindalco and Essar?

It will be difficult for me to comment on this. We have not yet gone through the entire 70 page High Court order which was given a few days back.

What will be Mahan Coal’s fate, the JV company with Essar?

It will continue to remain and we will receive compensation to the extent of our holding (50 per cent) in the joint venture.

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