Indian Bauxite Export Duty to Aid Aluminium Smelters

Finance Minister P Chidambaram's proposal to levy 10 per cent export duty on bauxite comes as a breather to aluminium smelters. Now, bauxite exports would turn uncompetitive and the availability of additional bauxite would help the domestic aluminium industry increase capacity utilisation.

An Icra report estimates India's bauxite exports in the first half of the current financial year at 0.48 million tonnes (mt), a rise of 151 per cent compared to the year-ago period. In September, exports to China were reported at 0.11 mt.

"India's bauxite output rose 30 per cent in the first half of the current financial year, compared to a mere two per cent increase in aluminium output. This means a lot of surplus bauxite remained available for use in domestic smelters. Consequently, miners have been exporting despite the fact that companies such as Vedanta Aluminium faced a huge supply shortage of the raw material," said Icra analyst Soumyajyoti Basu.

China, a major bauxite importer, faced various challenges in importing the commodity from countries such as Indonesia, owing to which it turned to India. The Icra report said during April-September, export realisations rose 55 per cent compared to last year. "The export levy would help reduce exports to China, leading to additional availability for domestic smelters," Basu said.

During the quarter ended December, the domestic primary aluminium manufacturing industry recorded a significant shortage in the availability of bauxite, as issues such as protests in tribal areas and non-renewal of government approvals hit mining of the commodity. National Aluminium Company Limited faced a shortfall in bauxite, owing to temporary suspension of mining at its Panchpatmali bauxite mines due to the expiry of its mining lease. Subsequently, the company received a temporary work permit. It is expected bauxite mining would normalise soon.

The Vedanta group has stopped production at its one-million-tonnes-per-year Lanjigarh refinery because of non-availability of adequate bauxite. Before the shutdown, the refinery used bauxite sourced from Andhra Pradesh and Gujarat, which had led to increased production costs. Though the company had earlier secured captive bauxite mining rights in the Niyamgiri hills, operations couldn't be started because of environmental issues.

While domestic primary aluminium manufacturers are facing a shortage of bauxite, data shows bauxite mined in India rose 35 per cent during April-October 2012, compared to the corresponding period of the previous financial year.