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  • "A flourishing downstream industry, economical aluminium prices and improving aluminium usage can only increase aluminium consumption in India," - Mr. BD Garg, Executive Director, Jindal Aluminium Limited
  • Interviewee
    "A flourishing downstream industry, economical aluminium prices and improving aluminium usage can only increase aluminium consumption in India," - Mr. BD Garg, Executive Director, Jindal Aluminium Limited
    CATEGORY
    Interview
    INTERVIEW DATE
    27/Apr/2017
    SOURCE
    AlCircle.com
    EDITED BY
    Dipanwita Gupta
    DETAIL

    Jindal Aluminium Limited is a leading aluminium extruder in India and the largest aluminium product manufacturer with above 35% of the market share. Leading the company from the forefront is a group of stalwarts among whom B.D. Garg deserves a special mention. A veteran in the Indian aluminium industry, B.D. Garg joined Jindal Aluminium in 1976 and has been working there ever since. He has worked in various positions in the company and was promoted to Executive Director and CEO of the company in 2011. As ED of the company, Mr. Garg is responsible for company’s aluminium extrusions, rolled products as also renewable energy businesses. Besides, he also monitors working of the group’s CSR activities. 

    AlCircle had an opportunity to talk to him about the current aluminium industry scenario of India.

    Here’s an excerpt from the interview: 

    AlCircle: Jindal Aluminium is riding high on expansion and diversification. Tell us in brief about the latest developments in the company. 

    Mr. Garg: During last Financial Year i.e. 2016-17 we have invested INR 110 Crores for a 20 MW solar power project in Dist. Davangere, Karnataka.  Before this in 2015-16, we had established about 40 MW wind power projects with an investment of about INR 270 crores.  Out of this, 25 MW was in Andhra Pradesh and the remaining 15 MW in Karnataka. Besides, to consolidate our leadership in aluminium extrusion, we’ve also installed one more extrusion press of 2500 tonnes capacity of Ube, Japan make. This press will add another 20,000 TPA in our extrusion capacity.  We have now 11 extrusion presses with total production capacity of 1, 20,000 tonnes p.a. which is the highest by any manufacturers in India. However, power finds a prominent place in our overall growth plan and we’ll be investing funds regularly and will increase our capacity from 80 MW to150 MW in next 3 years.

    AlCircle: Your company achieved record production numbers in FY 2017. Which factors would you attribute this significant growth to? - Positive demand scenario in domestic market / Technology advancement, or both?

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    Mr. Garg: During 2015-16 we achieved a production of 80,300 tonnes of aluminium extrusions which was increased to 83,425 tonnes in 2016-17 which is the highest by any manufacturers in India.  Actually the plan was to achieve 90,000 tonnes during 2016-17 but demonetisation adversely affected the demand for short period of 2-3 months and hit overall production last year. Even then, I’m happy that we could register growth in 2016-17 albeit, marginal. 

    The demand of aluminium extrusion is quite good and the sector has been growing at the rate of 7-8%.  The building & construction industry is the major user of extrusion in India. With the continuous growth in the sector, supported by growing economy, the demand of extrusion is poised to show a healthy growth. Auto and solar segments also offer good potential.  Huge investments are also being planned by the Government in infrastructure which will further increase the demand of aluminium extrusions high.  Manufacturers who deliver quality extrusion in committed time like Jindal will always have their order books full. I take this opportunity to thank all our customers and value their association who have patronised us for years together and are instrumental in our growth. 

    AlCircle: Renewable energy seems to be occupying a priority area in Jindal Aluminium’s strategy right now after extrusions. Do you see the solar power project in Bengaluru meeting your long-term sustainability targets? How? 

    Mr. Garg: We have 50 MW of wind power and 30 MW of solar power project, out of which 25 MW wind power is commissioned in Andhra Pradesh and remaining projects are established in the State of Karnataka. Out of our total capacity of 80 MW, about 17 MW wind power and 10 MW solar power is for our captive use. This capacity is sufficient to meet 100% requirement of both our plants in Bangalore.  Remaining power is sold to grid for which we have Power Purchase Agreement with the respective State Governments.  As stated above, we have plans for further investment in renewable energy and we shall continue to do so regularly.

    AlCircle: What is your view about Indian aluminium sector’s current energy needs and its efforts to meet the same?

    Mr. Garg: Smelting of primary aluminium metal is energy intensive. To make a tonne of aluminium metal around 15,000 units of energy is needed. In India there are 4 primary producers and all the producers having their own captive power plants which are sufficient to meet their 100% requirement.  As such, availability of energy is not an issue but its cost is an important factor which will keep increasing.  We can’t remain oblivious to the fact that high energy cost is driving smelters to close in many countries.  Recently, China had to shut few smelters to reduce pollution.

    Globally, countries promote recycle of aluminium to save energy and reduce pollution since aluminium can easily be recycled, infinitely. It is well known that compared to production of virgin metal, recycling of aluminium scrap needs only 5% energy cost and produces 95% lesser green house emissions. Hence, Government should encourage use of aluminium scrap and incentivise it’s import and use.  

    Consumption of energy in downstream products is very less and there is absolutely no problem with regard to availability of power in different parts of the country.

    AlCircle: Coming to India’s escalating aluminium demand, where do you see Jindal Aluminium placed in the national map as a leading extrusions provider?

    Mr. Garg: Jindal Aluminium Limited (JAL) is the largest producer of aluminium extrusions in India with installed production capacity of 1,20,000 tonnes p.a. and second largest for aluminium flat rolled products with a production capacity of 40,000 tonnes p.a. Since inception of our Company in 1968, we have been a leading producer of aluminium extrusions in the country.  Quality has always remained a key area for us; our emphasis has not only been producing a quality product but how to improve it further at economical cost to exceed our customers’ expectations. We regularly invest to update and adopt the new and the best technology available around us to improve our products. This has paid rich dividend to the Company which is reflected in our increasing volumes year after year. 

    We are very positive about future of extrusion industry in India as well as abroad.  Aluminium is a light weight and green metal.  With its many qualities like, light weight, high weight to strength ratio, corrosion resistance, versatility, excellent thermal conductivity, good aesthetics, and recyclability etc aluminium extrusion scores well over other metals.  Extrusion process can mould the metal easily in any shape as per requirement.  Hence, use of aluminium extrusion in manufacture of auto, aircraft, railway coaches, buses, trucks; buildings will keep on rising and has a bright future.   

    With advent of modern technology newer uses of aluminium extrusion are regularly found which will keep demand of aluminium extrusions always high.

    In case of aluminium flat rolled products also within 4 years we have established our quality. The quality of our rolled products is considered better compared to our nearest competitor.

    AlCircle: How do you look at the rising imports impacting Indian aluminium industry? Do you see in Minimum Import Price (MIP) a cure-all for this issue?  

    Mr. Garg: Wrong impression has been created by the primary producers that India is importing considerable quantity of aluminium metal at cheaper price. This is absolutely false information being spread by the primary producers to extract undue favour from the Government by way of levy of Safeguard duty and fixing Minimum Import Price (MIP).  It is claimed that their capacity utilisation is only 47 - 48% since 50% of the aluminium demand of the country is met by imports at a cheap price from nearby countries mainly China and Middle East countries. All this is absolutely false and misleading. In fact there is zero import of primary aluminium metal from China since China imposes 5% export duty to discourage export of aluminium metal from their country. It’s impossible to import aluminium metal from China for this reason.  As regards import from Middle East and FTA countries, there are no cheap imports as it is claimed by the primary producers.  World over prices of aluminium metal are being fixed based on prevailing LME to which  premium as prevailing on Main Japanese Port premium (MJP) is added to arrive at CIF price of metal. All the imports taking place in the country are based on the above price formula. 

    Indian producers are also fixing price of aluminium metal based on the above formula i.e. prevailing LME + prevailing MJP. They are also adding import duty of 8.25% in the price and about 5% towards forward and clearing charges. In fact primary producers in India are having extra benefit of 13.5% compared to producers of aluminium metal in other countries.  It is rather surprising that despite having around 13.5% protection, primary producers want more protection from the Government. This is nothing but their greed to earn more money at the cost of consumers which will ultimately kill the industry. You can’t survive by making aluminium expensive and killing the demand. 

    DG (Safeguard) made extensive enquiry on the application for levy of Safeguard Duty and concluded that their capacity utilisation is 100%, not 46-47% as per their claim and there is not much of import of metal. He also reported that the imports are in fact a price which is more that the local prices and imports are not the reason for the depressed profitability of the primary producers. The report of DG (Safeguard) submitted in the month of December, 2016 is available for anyone to read is an eye opener for the aluminium industry. The imports are hardly 15% of the domestic consumption and imports are taking place mainly against export entitlement or from FTA countries. Hence, there is neither any justification for levy of Safeguard duty or fixing MIP on aluminium metal.

    It is worth mentioning here that MECON has done a study for fixing MIP on aluminium metal and has recommended the same. However, it has to be kept in mind that applicants of MIP have appointed MECON through Aluminium Association of India (AAI). Naturally, the report of MECON can’t be treated as impartial and can’t be a basis to decide an important levy like MIP. The platform of AAI is being misused by primary producers for their selfish interest which is highly unfortunate.           

    AlCircle: What ideally should be the focus of the industry to reach its ambitious 5 MT consumption target by 2020?

    Mr. Garg: Needless to argue that a flourishing downstream industry, economical aluminium prices and improving aluminium usage can only increase the consumption. Primary producers have to play an important role by creating awareness and representing before Government for issues affecting the industry and also for increasing consumption of aluminium in transport sector and packaging which is lagging behind compared to other developed/developing countries in the world.  Railways are one such department which can use aluminium in a big way.  There is hardly any consumption of aluminium in railways. Besides, packaging industry is other area where consumption of aluminium can be increased considerably. If the industry particularly primary producers concentrate on increasing the use of aluminium, it is quite possible to achieve the target of 4 - 5 million tonnes consumption of aluminium metal by 2020. 

    AlCircle: Indian aerospace and defence sector OEMs are creating fresh demand for specialty aluminium alloy extrusions. Any plan to explore these markets in the near future?

    Mr. Garg: Though building & construction is the biggest user aluminium extrusion in India now but aerospace and Defence sector are already focus areas for us. Compared to many developed countries India’s contribution in these 2 sectors is hardly anything. With many renowned aero and defence companies looking and shifting eastward mainly in India, we expect that demand from these two sectors will be quite significant which is presently being met through imports. We are in touch with many manufacturers who are involved in Aerospace and Defence industries and are planning to invest in technology and equipment to be able to serve this industry.  This is a new area and will definitely help us in increasing our overall production.

    AlCircle: What is Jindal Aluminium’s outlook for the aluminium applications sector in the current financial year?

    Mr. Garg: Even though building industry is our main focus for supply of our products, but we are giving more importance to Aerospace, Defence, Transport and Packaging industries to increase our sales in these areas. Besides, we are also exploring new export market in Africa where we see good demand of our products in the time to come.  

    Disclaimer: “The information presented herein is neither intended nor implied to be a substitute for professional advice. The views and opinions shared in the interview section of www.alcircle.com are unique to the interviewees and do not necessarily reflect the viewpoint of www.alcircle.com."