Government Tells Nalco to Reconsider Foreign Expansion Plans

Government Tells Nalco to Reconsider Foreign Expansion Plans
Bahai Lotus Temple, Delhi. Source: Wikimedia

India’s Mines Secretary said recently that National Aluminium Company should concentrate upon building more smelters domestically in order to take advantage of cheap and readily available power instead of pursuing overseas expansion projects.

“We have asked Nalco to concentrate on making aluminum domestically, rather than exporting alumina,” Mines Secretary Balvinder Kumar said in a recent interview. “We want to reduce our dependence on imports.”

According to commentators, the refocus upon local smelting is a small part in the government’s wider plan to promote domestic manufacturing, encourage exports of value-added goods, and an effort to curtail the shipping of minerals. It may also be a reaction to Nalco’s agreement with Iran to explore establishing capacity in that country.

“We have a surplus power generation capacity and prices have come down,” explained Kumar. “There is enough demand in the country. Nalco can set up a 2 million ton-a-year smelter in India. Then they don’t need to sell alumina to anyone.”

The firm settled upon Iran after a search of several Asian countries with cheap power to sell. Nalco has struggled with power costs in recent years, as it was forced to import expensive coal to fire its power plants until very recently, when power capacity finally eclipsed demand, dropping power prices as a result.

“From the government’s perspective, they are correct. It’s better to process raw materials within the country,” said Emkay Global Financial Services Ltd.’s Goutam Chakraborty. “But for Nalco, margins are better for alumina, not aluminum.”

Nalco was established in 1981 as a public sector company administered by the Ministry of Mines. It is the largest integrated aluminium complex in Asia, and the sixth largest in the world. The complex conducts bauxite mining, alumina refining, aluminium smelting and casting, power generation, rail and port operations. The main units of Nalco are at Damanjodi (Mines & Refinery complex) and Nalconagar, Angul (Smelter & Power Plant Complex).