“The adoption of the Carbon Border Adjustment Mechanism (CBAM) by the EU poses a substantial challenge to India's aluminium industry and has the ability to influence the worldwide price of aluminium,” Abhijit Pati, Chief Transformation Officer, Aluminium Business, Vedanta Ltd.

Mr Abhijit Pati is the Chief Transformation Officer of Aluminium Business in Vedanta Limited. He is a name to reckon with, who owns a bag full of rich experience and illustrious career in the aluminium industry for over 30 years. An Alumni of Calcutta University, Abhijit Pati started his career as an engineer with Indian Aluminium Company (a subsidiary of ALCAN, a major Canadian aluminium Producer) in 1989. As a young and budding professional in his early career, he was awarded the 'Exceptional Contributor Award' by Group Chairman Mr Kumar Mangalam Birla for his significant contribution to the turnaround story of the Hirakud Aluminium Smelter in the year 2006. Also, he bagged the Prestigious British Sword of Honour for Hirakud Smelter in 1999.Now, with his enriching knowledge, he is leading Vedanta‘s Aluminium Business as the Chief Transformation Officer and paving the company’s path to further progress embracing advanced technology.

In June 2023, the AL Circle Team was fortunate to meet Mr Abhijit Pati at the 27th International Conference on Nonferrous Metals and been part of an insightful conversation regarding India’s aluminium future market growth, Vedanta’s steps towards sustainability with the Government’s support, possible impacts of CBAM on the indigenous industry and much more. To know further, please read the excerpt of our valuable conversation.

AL Circle: Please suggest ways to increase India’s per capita consumption of aluminium, which is currently at 2.5 kg compared to a world average of 11 kg.

Abhijit Pati: The Indian government is actively pushing for an increase in indigenous aluminium production and the development of Smart Cities. The dynamics of aluminium consumption are undergoing a transformation, with a growing preference for value-added products. While electricals have historically dominated the industry, emerging segments like packaging, construction, transportation and consumer durables are now embracing aluminium. This shift in consumption patterns positions India to catch up with its developed counterparts in Europe and the US. Currently, electricals account for 37% of India's aluminium consumption, mainly driven by government reforms and substantial investments in power infrastructure. In contrast, the global average for aluminium use in electricals is only 14%, with construction and transportation being the preferred industries worldwide, each accounting for 26% of the aluminium share.

As the Indian economy experiences an upturn, there is a projected rise in aluminium consumption, with per-capita numbers expected to increase from 2.5 kgs to 5-6 kgs. Investments in sectors like rural electrification, infrastructure, transportation and aviation will contribute to this trend. To attain the global average of per capita aluminium usage, an additional annual aluminium consumption of 16 million tonnes is required, as per the National Institution for Transforming India (NITI) Aayog.

To achieve these objectives, several strategies can be employed:

• Promote awareness and education: Increasing general awareness about the benefits and diverse applications of aluminium is crucial. Educating stakeholders through campaigns, workshops and seminars will highlight its versatility, durability and recyclability potential.
• Infrastructure development: Encourage the use of aluminium in construction, transportation and power transmission projects. Emphasize its lightweight nature, corrosion resistance and low maintenance requirements to architects, engineers and government agencies for incorporation in public infrastructure.
• Industry collaborations: Foster collaborations between aluminium manufacturers, suppliers and end-users to explore new applications and products. Partnering with industries like automotive, aerospace, consumer electronics and packaging can lead to innovative uses of aluminium.
• Incentivize domestic production: Support domestic aluminium manufacturers with incentives to increase production capacity and efficiency. Tax benefits, subsidies and favorable regulations will ensure competitive pricing and availability.
• Government policies and regulations: Formulate policies and regulations that encourage aluminium usage across sectors. Setting energy efficiency standards, mandating specific applications and supporting research and development will drive adoption.
• Research and development: Invest in R&D initiatives to improve aluminium properties, manufacturing processes and cost-effectiveness. Developing new alloys and efficient production methods will make aluminium more appealing to various industries.

By implementing these multifaceted strategies, India can elevate its per capita aluminium consumption, narrowing the gap with the global average. Government support, industry collaboration, public awareness and technological advancements will play pivotal roles in achieving this transformation. 

AL Circle: What policy support do you expect from the Indian Government to raise the domestic aluminium contribution to the country’s GDP growth?

Abhijit Pati: The Indian aluminium industry has sought government assistance to address issues like dumping, import safeguard tariff and tax reductions. The sector has also pushed the government to increase the basic customs charge on primary aluminium and scrap aluminium by 10%, eliminate the coal cess and lower corporate tax rates, among other things.

The government may provide policy support in numerous areas to increase domestic aluminium's contribution to India's GDP growth. In addition to the ideas mentioned previously, some essential policy initiatives that can be put in place:

• Skill development programmes: The government can set up skill development programs to help the local workforce in the aluminium industry. Vocational training, apprenticeship programs and collaborations with educational institutions to provide specific courses in aluminium fabrication, design and production can all be part of this. The government may boost domestic employment and build a competitive advantage in the aluminium sector by developing a trained workforce.
• Streamlined regulations and permits: The government can seek to streamline rules and permit processes relating to the aluminium industry. Simplifying procedures for acquiring relevant licenses, environmental approvals and land acquisition will minimize administrative costs and stimulate sector investment. Clear and clear laws will create a welcoming climate for both domestic and foreign investors.
• Export promotion policies can be implemented by the government to stimulate the export of aluminium and aluminium-based products. This can involve offering export subsidies, developing export promotion zones and participating in international trade fairs and exhibitions to highlight the capabilities of the domestic aluminium industry. Export promotion will not only help to GDP development, but will also improve the sector's overall competitiveness.
• International collaborations and trade agreements: The government might look into international collaborations and trade agreements to boost the competitiveness of the domestic aluminium industry. This can include negotiating favorable terms for aluminium commerce, promoting technology transfers and forming research and development alliances. International collaborations can provide access to new markets, technology and experience, thereby assisting domestic industry growth.

In addition, as per the Budget 2023, the Indian government has stated that it will address roadblocks that restrict India's aluminium industry and encourage the production of advanced aluminium products. With the demand for aluminium expected to rise, particularly in the automotive and construction sectors, the Indian government has proposed to introduce an Aluminium Development Council to promote the development of the aluminium industry and ensure its sustainability.

Therefore, to raise the domestic aluminium contribution to the country's GDP growth, it would be helpful for the Indian government to continue providing policy support, including enhancing tax incentives, imposing import safeguard duties and addressing issues related to dumping and intellectual property rights infringement. It would also be beneficial for the government to provide incentives for energy- efficient technologies and promote research and development to create advanced aluminium products. 

AL Circle: What impacts do you think the EU-imposed CBAM will have on the Indian aluminium industry?

Abhijit Pati: The adoption of the Carbon Border Adjustment Mechanism (CBAM) by the EU poses a substantial challenge to India's aluminium industry and has the ability to influence the worldwide price of aluminium. The CBAM seeks to combat 'carbon leakage' by levying a fee on imports that emit a high level of CO2, including aluminium products. According to a recent estimate, select Indian steel and aluminium shipments to the EU could face a significant 20-35% levy beginning in 2026.

The CBAM's impact on the Indian aluminium sector is dependent on a number of factors, including the fee's amount, the carbon intensity of the Indian aluminium industry and the availability of replacements for Indian aluminium in the EU market. The CBAM will likely raise the cost of Indian aluminium exports to the EU, potentially making them less competitive in the market.

The following are some potential effects of the CBAM on India's aluminium industry:

• Higher Costs for Indian Aluminium Exporters: The CBAM's introduction of a carbon-intensive import tax will increase the cost of Indian aluminium exports to the EU. This could have a severe influence on Indian aluminium's competitiveness in the European market, resulting in a drop in exports.
• Production Shift: The CBAM could cause a shift in aluminium production from India to countries without a carbon pricing system. This could lead to job losses in the Indian aluminium industry as production shifts to more cost-competitive regions.

While the immediate impact of the CBAM may be primarily felt by aluminium and iron and steel exports, it is crucial to recognize that the CBAM could be expanded to other sectors in the future. As a result, India's aluminium industry needs to adapt to the evolving climate policies, focusing on reducing its carbon footprint and improving energy efficiency. By doing so, the industry can maintain a strong and sustainable trading relationship with the EU market.

According to UNCTAD, the possible loss of $1-1.7 billion in exports of energy-intensive products such as steel and aluminium emphasizes the gravity of the challenge confronting India's aluminium industry. The implementation of the CBAM will increase compliance costs for businesses by requiring monitoring, calculating, reporting and confirming emissions. As the CBAM's impact grows in the next years, it becomes critical for India's aluminium industry to embrace green initiatives and adapt to changing global climate policy. The industry may counteract the negative effects of the CBAM and preserve its long-term sustainability and competitiveness in the international market by adopting more sustainable methods and lowering carbon emissions.

AL Circle: According to you, which end-use sector will contribute to the growth of global aluminium consumption in 2023?

Abhijit Pati: A number of significant end-use sectors are anticipated to fuel the increase in the global demand of aluminium in 2023. As a result of the growing demand for renewable energy and the need to update old infrastructure, the transmission industry is expected to grow by an amazing 5.5%. The efficient delivery of energy from power plants to residences and businesses is made possible by the use of overhead wires, cables and transformers, which are made of aluminium, a key element in this industry. Aluminium is the material of choice for transferring electricity over great distances due to its high conductivity, light weight and long-lasting resilience.

Government incentives and the growing customer preference for environmentally friendly transportation are expected to propel the sales of electric cars (EVs) to a stunning 25% rise in 2023. Aluminium is used extensively in the EV industry to build EV bodies, chassis and batteries. The significance of aluminium in this field is further cemented by the EVs' rising appeal as a more environmentally friendly substitute for gasoline-powered cars. While its corrosion-resistant qualities make it important for withstanding the hostile environments inside EV batteries, its lightweight quality improves the fuel efficiency of EVs.

The growing demand for canned and bottled beverages is driving the beverage industry's 2% increase in 2023. Aluminium is also important in this situation because it is used in cans, bottles and closures. The significance of aluminium in this industry grows more obvious since options for portable and practical beverages become more and more popular.

In addition to these important industries, the construction, packaging and equipment sectors are also major drivers of the increase in the global demand of aluminium. Each of these end-use industries contributes to the shifting patterns of aluminium consumption, demonstrating the material's adaptability and indispensable nature in a range of industrial settings.

An important factor boosting global demand for renewable energy sources is the rising demand for aluminium. The advantages of aluminium's use in wind turbines, solar panels and other renewable energy technologies are actively sought after by businesses and governments in their efforts to reduce carbon emissions.

Parallel to this, there is a growing demand for electric vehicles due to a global shift toward more environmentally friendly modes of transportation. Aluminium's crucial function in the manufacture of the bodywork, chassis and batteries for electric vehicles (EVs) solidifies its prominence in this quickly developing market.

Additionally, the growing demand for portable and practical beverage options encourages an increase in aluminium usage in the beverage industry. Aluminium's use in cans, bottles and closures effectively adapts to changing consumer demands.

Overall, it is anticipated that the world's consumption of aluminium would increase by 1.7% in 2023, led by the strong demand from the beverage, EV and transmission industries. These achievements reinforce the metal's crucial role in determining the industrial landscape, which is further supported by India's significant contribution to the global aluminium sector. Expert Market Research forecasts a CAGR of 3.63% for the worldwide aluminium market from 2023 to 2028, which they credit to the increased demand from significant end applications such transportation, machinery & equipment and construction. This data highlights the aluminium industry's durability and promise, pointing to a future marked by ongoing development and innovation.

AL Circle: Do you think recycling is the only way to achieve net-zero carbon emissions in the global aluminium industry?

Abhijit Pati: Recycling is not the sole means to get the global aluminium industry's carbon emissions to zero, but it is a critical component of the answer. The Aluminium Association claims that only 5% of the energy needed for primary metal production is used to produce recycled aluminium. Aluminium recycling thus results in a 92% reduction in carbon emissions. Recycling rates for aluminium are above 90% in most industrial sectors, including the building and automobile industries. To achieve net-zero carbon emissions, a range of tactics are needed, including recycling, employing cleaner industrial methods and converting to renewable energy sources. Here are some critical considerations:

• Cleaner manufacturing processes: The aluminium industry may employ cleaner and more efficient production processes to reduce carbon emissions. This requires utilizing cutting-edge smelting techniques, improved electrolysis cells and inert anodes, among other improvements. These innovations have the potential to reduce greenhouse gas emissions, boost production effectiveness and consume less energy.
• Adoption of renewable energy: The aluminium industry must switch to renewable energy sources in order to achieve net-zero carbon emissions. Utilizing renewable energy sources, such as solar, wind, or hydroelectric power, can dramatically reduce greenhouse gas emissions related to the production of electricity. To make this transition easier, it is crucial to encourage the growth and grid integration of renewable energy.
• Carbon capture and storage (CCS): CCS technology can help the aluminium sector cut down on carbon emissions. In CCS, carbon dioxide emissions from industrial activities are captured and either stored underground or used in other ways. CCS may be implemented in aluminium smelters and related facilities to reduce emissions and reach net-zero goals.
• Research and development: For the aluminium sector to find and adopt new technologies and practices that minimize carbon emissions, continued investment in research and development is essential. This might involve finding new raw materials, creating sophisticated recycling techniques and enhancing processes to boost energy efficiency and lower carbon footprints.
• Cooperation and policy support: To accelerate the transition toward net-zero carbon emissions in the aluminium industry, international cooperation among governments, industry stakeholders and research institutions is crucial. Through incentives, rules and funding for activities in research and development, the use of renewable energy and carbon reduction, governments can promote policy.

It is crucial to remember that getting the global aluminium industry to net-zero carbon emissions will take time and effort. Recycling is a key component of the solution, which calls for a comprehensive strategy that includes several tactics. The industry may get closer to the objective of net-zero carbon emissions by putting in place a comprehensive package of policies that emphasize recycling, cleaner production, the use of renewable energy, carbon capture and cooperation.