Agarwala said that domestic demand of aluminium was 597,000 tonnes in 1999-2000 and exports clocked 1,46,000 tonnes. Domestic production of aluminium totalled 6,21,000 tonnes and there was a deficit of aluminium metal domestically to the tune of 122,000 tonnes which was met through import of aluminium scrap and metal. Domestic demand is likely to grow to 6,45,000 tonnes in fiscal 2000-01 and exports are likely to be 1,32,000 tonnes. Production is expected to touch 660,000 tonnes which means that deficit of aluminium domestically is likely to be around 1,17,000 tonnes in the current year.

By the year 2005, Agarwala says, domestic demand will have expanded to 8,78,000 tonnes and exports would be to the tune of 1,76,000 tonnes.

Production in 2005, after the expansion of capacity of Nalco and Hindalco is likely to be 8,80,000 tonnes. The resultant shortfall for domestic consumption is likely to be 174,000 tonnes. The change drivers for the aluminium industry, Agarwala said, are likely to be the increased infrastructure spending especially in construction and the turnaround in the auto sector. These will boost the offtake of metal locally.

Currently, domestic production exceeds demand and the need for imports arises only because the aluminium companies, especially Nalco and Hindalco are exporting aluminium metal and other value added products. In 1999-2000 Hindalco exported 46,369 tonnes of metal and Nalco exported 95,185 tonnes. By the year 2005, however, domestic production and consumption will more or less be the same at 8,80,000 and 8,78,000 tonnes respectively.

Both Hindalco and Nalco are in the midst of expanding all round capacity right from mining, refining, smelting and even power generation. Nalco will raise its alumina production capacity by 31.25 per cent to 10.5 lakh tonne per annum (tpa) from the existing level of 8 lakh tpa. After the first phase of production capacity expansion, termed as debottlenecking, the company will go for increasing the level to 15.75 lakh tpa, a straight 96 per cent rise over the present level. This second phase expansion is expected to be completed by March 2001.

The first phase of expansion, which is estimated to cost Nalco about Rs 1,664.60 crore also includes doubling the bauxite production to 48 lakh tpa. The company is also targeting to increase smelter capacity to 3.45 lakh tpa from the existing level of 2.30 lakh. This expansion is expected to be completed by May 2002. Nalco is also undertaking a 33 per cent hike of power generation from the current level of 720 MW which collectively will cost the company Rs 2061.98 crore.

The CMD of Nalco is reported to have said that Nalco has already placed orders worth 60 per cent of project cost or about Rs 2000 crore for the smelter expansion." Hindalco is in the midst of a brownfield expansion in phases. This expansion will increase its aluminium smelting capacity by 1,00,000 tpa, alumina refining capacity by 2,10,000 tpa and a matching increase in power generation capacity. It is scheduled for completion in phases by end of fiscal 2002-03 and entails an expenditure of Rs 1800 crore.

Domestic aluminium industry is one of the lowest cost producers of aluminium in the world. The policy environment for aluminium has also been favourable and the duty structure has been changed to protect the industry against cheap imports and keep it profitable. Basic import duty on aluminium was increased from 10 per cent in 1997-98 to 27.5 per cent in 1999-2000. In the current fiscal they remain unchanged at 27.5 per cent but in the medium to long term import duties are expected to come down.

Currently, the domestic industry's profitability is well protected from imports. In January when spot aluminium prices peaked to $1742 per tonne on the London Metal Exchange (LME), the landed cost of metal (excluding excise) worked out Rs 1,04,095 per tonne. The domestic aluminium companies in response to the rising international prices raised prices by Rs 3000 on February 1 to Rs 81,250 (excluding excise). There was thus a price differential of over Rs 20,000 between landed costs and domestic producer prices. Since the peak of January, however, prices have steadily ranged lower on the LME and reached a bottom of $1,397 per tonne on April 20. But even at these price levels the landed cost is around Rs 3,000 per tonne more than domestic producer prices which have remained unchanged since February.