Bauxite Tax Might Force Indian Aluminum Players to Sell Domestically

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India’s bauxite story has been one of contradictions. Local aluminum players claim to always have shortages of the mineral but the major bauxite players are keen to export it because of the lucrative international prices.

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Now, with a 20 percent tax, it will become more expensive to export bauxite, thus adding capacity to domestic aluminum production. Which could also mean cheaper aluminum being manufactured in India.

At least, India’s Hindalco and the London-listed Vedanta Resources have been looking to expand aluminum production capacity in the country, which necessitates the supply of billions of tons of the raw material.

Vedanta, especially, has not found it easy to tap into domestic sources. The new tax hike could make things easier for both, especially Vedanta Group’s Sesa Sterlite, which has been struggling to run its alumina refinery in Odisha province following a controversy-ridden denial of access to deposits from Odisha Mining Corporation (OMC) on environmental issues.
The tax hike proposal has not gone down well with the mining lobby body, the Federation of Indian Mineral Industries (FIMI).

It has claimed that the hike in export duty would only lead to the stacking of the mineral in the country.

R K Sharma, secretary-general of FIMI, was quoted in the Business Standard newspaper saying India never exported high-grade bauxite but only inferior quality material mainly from the west coast, used primarily in refractories and for non-aluminum making purposes. The hike will only lead to stockpiling of low-grade bauxite, he said.
India exports about 300,000 tons of bauxite from Maharashtra and Gujarat a year. These stockpiles are exported mainly to West Asian nations, besides China, and India occupies sixth place in the world with a share of 3.19 percent of world reserves.

While FIMI has its own views, India’s aluminum sector, has welcomed the decision, as not only one that will increase revenue for the government but will also expand supply lines for domestic industry.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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