India is the second largest producer of aluminum with a capacity of 4.1 million tonnes per year (mtpa) to meet the country’s demand of around 4 mtpa.
India’s global production share is around 3 percent.
Despite this, 60% of India’s demand is met by imports.
In that relation, the country has had a decrease in the share of the domestic market from 60% in fiscal year 2011 to 40% in fiscal year 2020, despite sufficient national capacity, according to the company Wabco India Limited.
This increase in imports has been driven by the partner countries of Free Trade Agreements, which has facilitated scrap imports to India.
After importing aluminum and its manufactures for a value of 2,835 million dollars in 2021, this value rose to 5,679 million dollars in 2021.
India was the world’s 12th largest aluminum importer last year, posting 55% year-on-year growth in 2021.
The production cost of metallic aluminum in India has increased substantially in the last 3-4 years due to rising cost of raw materials such as high coal prices and high coal taxes, high logistics costs, high energy cost due to renewable energy purchase obligations, high electricity tax, etc.
Even though India has the world’s fifth-largest reserves of coal and bauxite, the aluminum industry is struggling to stay globally competitive.
Captive power producers serving the aluminum industry have signed fuel supply agreements with Coal India Limited and its subsidiaries to secure long-term coal supply.
Any abrupt interruption of this guaranteed coal supply has a severe impact on SMEs in the downstream sector, resulting in higher prices for finished products and a burden on end consumers, Wabco India Limited notes.
India, the second-biggest producer of primary aluminum after China, has urged utilities to import coal to boost domestic supply of the fuel as coal-fired generation surged following the easing of coronavirus-related restrictions.
The inadequate supply of coal in India has raised concerns about a potential disruption in local aluminum production.