“There is a huge opportunity in India and the domestic metal demand is pegged to grow manifold,” Mr. Abhijit Pati, CEO (Aluminium), Vedanta Ltd.

Mr. Abhijit Pati started his career as a budding engineer with Indian Aluminium Company (subsidiary of ALCAN in Indian Aluminium Company) in the year 1989. After working with Hindalco for years with numerous laurels, he joined Vedanta in 2008, as the COO of one of the largest Greenfield Aluminium cum Power complexes of the world at Jharsuguda, Odisha. Subsequently, Mr. Pati was elevated to the position of the President and CEO, Aluminum Business in March’15. He is currently one of the senior management officials and an Executive Committee team member of Vedanta and also the lead ex officio member of Governing Council of the Aluminium Association of India (AAI).

AlCircle had an opportunity to talk to him during the National Conference on Non-Ferrous Minerals & Metals- 2016 in Jamshedpur. He talked about raw material security, Vedanta’s current and future projects and shared his outlook for the Indian aluminium industry.

Excerpts from the interview:

AlCircle: You recently spoke about enhancing production capacity in Lanjigarh refinery from 1 mtpa to 1.5 mtpa, and subsequently raising overall aluminium output of Vedanta. How is Vedanta planning to achieve that considering the constant lack of domestic bauxite supply being faced by the refinery?

Mr. Pati: It is unfortunate that in spite of being located on the pit head of bauxite, we have to depend on other sources. Our increased capacity requirements will be fulfilled by enhanced production from BALCO’s captive mine, other domestic sources & to some extent, imports.

AlCircle: Despite having a rich deposit of quality bauxite and coal, major Indian aluminium producers are still importing a large quantity of these materials. How do you think this issue can be solved?

Mr. Pati: Mine auctioning will be the key game changer for mining industry. As a policy change, the government in 2015 amended the Mines & Minerals (development & regulation) Act and initiated the process of auctioning of mines bearing minerals such as Iron ore, bauxite, limestone, manganese etc. 2016 will see the auctioning of such minerals for the first time. Amidst weak global markets, we need to watch out for the bidding strategy that the metal companies will adopt despite the government’s plan to fast-track auctions and check illegal mining with satellite based surveillance. The government has to design the auctioning with global benchmarks for sustainability of the domestic Industry.

AlCircle: In April, 2016 Balco announced restarting of Korba rolling mill in Chhattisgarh by July. What was the major reason behind the closure and what is the current status of the plant?

Mr. Pati: The rolling mill was closed due to fall in LME prices, lower realization and higher production cost. We are planning to start the mill from Q2FY17 and the resuming activities are underway.


 

AlCircle: To withstand the low LME price and aluminium premiums, a number of primary producers are shifting their interest towards downstream applications. For example Alcoa is on the verge of splitting its primary and value added portfolio. What is Vedanta’s outlook in regard to this?

Mr. Pati: We are focusing more on value added products like billets & rolled products, especially wire rods whose domestic demand is growing in double digits.

AlCircle: Tell us in brief about Vedanta’s proposed plan for an Aluminium Park at Jharsuguda.

Mr. Pati: Aluminium Park would attract an investment of INR1,000 crore in the first phase. The park would have units manufacturing foils, conductors etc. and cater to other downstream aluminium users. Vedanta would be supplying molten aluminium metal from its adjoining plant in the area. The park would be spread over 200+ acres of government land adjacent to the Vedanta smelter in Jharsuguda. The permissions for land acquisition are underway. It will be the largest aluminium hub in India as a collaborative project between the government of Odisha and Vedanta. The State Government would develop the required infrastructure facilities. The park would have a potential of employing about 17,000 people in addition to the exchequer being benefitted both at the Centre and the state.

AlCircle: What is your outlook for the aluminium industry in India considering the steady GDP growth the country has been reporting during the last few years?

Mr. Pati: The IMF projected India's growth forecast as 7.5% vis-à-vis 3.2% global average & 6.2% for China. In India, it is majorly driven by domestic consumption due to lower energy prices & higher real incomes. Domestic demand of metal as per capita consumption in India is 2.2 kg vis-à-vis world average of 10.4 kg. This is in contrast to the almost equally populated China whose per capita consumption is 25 kg.

There is a huge opportunity in India and the domestic metal demand is pegged to grow manifold.  It will reach 3.5 million tons from the existing 2.8 million tons due to emerging applications in electrification, transportation, aerospace, packaging, building & construction etc. Further the government spending on Make in India and other infrastructure projects like rural electrification, railway transportation etc. could further boost the growth story. India is well placed with huge investments to cater domestic demand having installed a capacity of 4.1 MTPA which is currently operating at 2.3 MTPA (56%).

AlCircle: Do you believe that digitalization and e-commerce is going to work in the field of aluminium?

Mr. Pati: Industry does not respect outdated and obsolete traditions; it only respects innovations.  To sustain in an evolving market, technology, digitalization & e-commerce usage cannot be ruled out. However, an effective model needs to be explored for the same.

AlCircle: As a spokesperson for one of the leading aluminium producer, what steps do you think that the government needs to take to make the domestic Aluminium industry more competitive?

Mr. Pati: We strongly feel that the Indian growth story is intact, albeit fully recognizing the fact that China is taking advantage of the current scenario of the industry in our country. More than 50% of the domestic consumption is currently being met through imports from China and the Middle East. Another issue we have at hand is the underutilization of the domestic production capacity. Given the scenario, the Government needs to intervene with a slew of measures on these points without delay:

• Hike the current import duty for aluminium to counter imports from China, Gulf, Vietnam and FTA countries
• Impose stringent duty safeguards on primary aluminium metal in line with what has been done for the steel industry
• Provide help to the downstream by correcting the inverted duty structure
• Re-evaluate the anti-dumping duty on Caustic Soda Lye which is a raw material for aluminium production
• Ensure raw material security for domestic producers as since it is a power intensive industry and the prices and quality of bauxite and coal are a matter of concern for the industry

Mr. Pati: I also think that the aluminium sector should be included in the list of Core Industries & Harmonized List of infrastructure which will further help other players to improve their R&D, maximize the value addition capabilities of the downstream and help the industry leverage beneficial government interventions to come out as a strong entity for nation building and creation of more jobs.

AlCircle: Do you think Brexit will have an impact on the business interests of the aluminium players in India?

Mr. Pati: Brexit is unlikely to impact Indian businesses that are focused on purely tapping the UK’s domestic markets. But those intending to leverage the UK as a base to gain access into European markets might have to rethink plans. A looming risk is that of an imposition of trade barriers, scrapping of preferential rates, and higher taxes between the UK and rest of the EU, which might pose a hurdle for foreign companies to invest in the UK.
When it comes to the non-ferrous metal segment particularly aluminium and copper, Brexit is unlikely to have a significant impact on India’s non-ferrous metal sector. The region’s limited share in global metal consumption is something from which I am drawing my conclusion. After witnessing record low levels in the recent past, international prices of aluminium, copper and zinc have strengthened and are expected to remain range-bound in the near future. Brexit seems non-threatening to me as of now from the Indian Aluminium Producers' perspective.

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.”

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