Aluminium — the metal for an ‘Atmanirbhar Bharat’

Rameesh Kailasam | Updated on May 06, 2021

The govt must rectify the pricing anomalies of bauxite to boost local production

The primary source for aluminium is bauxite ore, which is processed to produce alumina that is smelted using an electrolysis process to produce pure aluminium metal.

Since most of bauxite is found on surfaces of earth, strip mining is possible and the top soil can be replaced for rehabilitation and land returned to its native ecosystem. Usually six-seven tonnes of bauxite produces one tonne of aluminium.

Aluminium is the second most-used metal in the world after iron. Starting with consumer electronics, household appliances, cooking utensils, doors and windows, food packaging, foils, cans, office work stations, automotive, transportation, electrical to industrial uses in the form of industrial appliances, aircraft, ships, trains, defence, communication equipment to spacecraft and so on.

As India aspires to become Atmanirbhar to manufacture locally, a significant contribution would come from sourcing aluminium locally.

Despite having massive bauxite deposits, India is dependent on imports for meeting its requirements. For India to become Atmanirbhar and a manufacturing powerhouse, aluminium will play a key role.

Aluminium today has replaced plastic, wood and steel as it is safe and has an important role in electronics manufacturing.

The price for bauxite is determined by the Mines and Minerals (Development and Regulation) MMDR Act and the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 which essentially define the formula for setting the average sale price (ASP) for metallurgical grade bauxite.

Pricing pain

Interestingly, bauxite is the only bulk mineral where ASP is determined via a formula from the selling price of the end product — Aluminium.

The current method, unlike other minerals, includes costs beyond ex-mines and expenditures such as logistics, transportation, loading, unloading, rental for stocking, sampling charges which results in an inflated price by a stark 300-400 per cent making it much dearer. This has translated into limited or no auctions putting off further investments.

The ASP calculation method has potentially made aluminium production comparatively unviable. This requires immediate correction wherein the ASP of Metallurgical grade bauxite needs to be calculated as per the monthly returns filed to India Bureau of Mines (IBM) by all miners which shall reflect the true market price.

Additionally, a National Mineral Index can be considered for capturing production from all sources of captive, non-captive mines etc. which may give the correct valuation of minerals and also address concerns of royalty on royalty as done in coal sector through the National Coal Index.

India continues to import aluminium and aluminium scrap thanks to a low import duty. A high GST Compensation cess on coal further makes cost of producing aluminium locally higher than the world average. This backed by high input costs of caustic soda, petroleum coke, alumina generously contribute to making Indian aluminium one of the most expensive metals thereby discouraging manufacturers to source from India.

The government has been announcing Production Linked Incentives (PLI) across sectors. Many sectors need aluminium as a raw material which will continue to be sourced through imports rather than local production unless these anomalies are urgently fixed.

It is important for the government to address these issues to make India a competitive destination wherein raw materials can be sourced locally at competitive prices. Aluminium through bauxite is therefore the necessary metal for manufacturing an Atmanirbhar Bharat.

The writer is a public policy professional

Published on May 05, 2021

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