In spite of falling aluminum prices on the world exchanges, Vedanta Resources of India is forging ahead [pun intended] with plans to raise smelting capacity by investing in a new smelter, power plant and upstream alumina production facilities in Orissa state, India. If the plans are completed, it will make Vedanta the fifth largest aluminum producer in the world and largely self contained with its own bauxite, alumina and low cost captive power plants.
Shareholders weren’t as enthusiastic though. The share price dropped slightly on the London Stock Exchange following the news. Vedanta is betting on continuing growth in the demand for aluminum in SE Asia. The company claims the new facility will be self-sufficient in power but with the country suffering power shortages and with the growth of electricity production falling way behind government targets one has to ask how effective that power source is going to be in a country that cannot produce enough coal to fire it’s existing power stations. Unable to produce enough coal in spite of huge reserves, state-run Coal India is looking to import from the world market, though state run Nalco (National Aluminium Co) had to cut output at its alumina refinery this year due to insufficient coal supplies.
As so often before, India’s tirelessly entrepreneurial industry looks as if it will be held back by state bureaucracy and a woefully inadequate infrastructure.