Indian aluminum sector gets rattled by the pandemic

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The Indian aluminum sector finds itself buffeted by the winds of uncertainty because of the COVID-19 pandemic. Industry leaders have suggested many measures to the India government to put the sector back on track.

Top of the list is a request to allow an export scheme for aluminum without any cap on the total exports. The Engineering Export Promotion Council (EEPC) of India recently wrote to the Commerce Minister to continue with the Merchandise Export from India Scheme (MEIS Scheme) without any limit on the aluminum exports.

Floated last year, the government trimmed the MEIS in the fiscal relief package recently extended to exporters. The government found it “unsustainable.” The view is that, in general, the MEIS had failed to boost exports and capture new markets. Critics argue MEIS cut hurts Indian aluminum sector

Indian aluminum is one of the high-growth areas which could propel the nation’s GDP. However, the COVID-19 pandemic has already affected India’s aluminum exports. Export values declined 11% from $ 5.7 billion in fiscal year 2019 to $ 5 billion in fiscal year 2020. The new directive with regard to MEIS would render aluminum exports vulnerable and uncompetitive.

Simultaneously, the Federation of Indian Mineral Industries (FIMI) has urged the government to curb aluminum imports. Furthermore, the federation asked the government to facilitate the “tapping of rich and almost inexhaustible” domestic resources by local players. Despite robust domestic demand and sufficient domestic aluminum capacity, India imported 60% of the aluminum it consumed.

Domestic primary aluminum producers — such as Hindalco Industries and the Anil Agarwal-led Vedanta Ltd — have been asking the government to implement remedial measures, such as anti-dumping and anti-subsidy duties, the Business Standard reported.

Domestic consumption of aluminum is expected to reach 10 million tonnes by fiscal year 2031-2032. To meet this future demand, India needs to increase bauxite production from 23 million tonnes in fiscal year 2019 to approximately 70 million tonnes by that time. Alumina production would have to rise from 7.4 million tonnes to 20 million tonnes.

India has second largest aluminum capacity in the world. The country has primary aluminum capacity of 4.1 million tonnes per year and downstream processing capacity of 3.9 million tonnes. Recently, the aluminum industry had made huge investments to increase domestic production capacity from 2 million tonnes per year to 4.1 million tonnes per year.

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