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R K Jain

Sr Vice President – Commercial

Jindal Aluminium Limited

1 Rating

ALUMINIUM INDUSTRY Fuelling the manufacturing segment would require a focus on the downstream aluminium segment

Mar 5, 2021

R K Jain, Sr Vice President – Commercial, Jindal Aluminium Limited - Aluminium, being the second most used metal, has a wide range of utilisation in various industries. Jindal Aluminium, the largest aluminium extrusion company of five decades with leading flat rolled products in the country, in this country dissects the status aluminium as a metal in upstream & downstream and more

On November 11, 2020, the Union Cabinet chaired by the Prime Minister approved the Production-Linked Incentive (PLI) scheme for 10 sectors, to encourage domestic manufacturing. The scheme, first envisaged in March 2021, entails earmarking financial outlays that will drive the country’s manufacturing sector by cutting down on imports and instead provide scope for harnessing the growth potential of domestic manufacturing.

Driving Indian manufacturing

As a driver of the manufacturing sector, the PLI scheme of the Government of India will help embrace Aatmanirbhar Bharat. It will enhance India’s manufacturing capabilities and increase exports for these champion sectors including automobiles and auto components manufacturing. It will make domestic manufacturing competitive internationally; build economies of scale and help India position itself firmly on the global supply chain map.

Playing a crucial role in achieving the objectives of the Government of India’s ₹1.46 lakh crore PLI scheme will be the downstream or secondary aluminium segment. This crucial segment, in need of policy support, is indirectly benefitted, given its versatile ability to meet the critical requirements of some of the sectors of PLI like automobiles and auto components, telecom and networking products, textile, solar modules, white goods, etc

Focusing downstream

With a processing capacity of 3.9 million tonnes, India’s downstream aluminium segment comprises of approximately 2500-plus companies that include both large and mid-sized, and a much bigger base of smaller and unorganised players. Schemes like PLI are much needed making sure they give wings to the vision of the downstream aluminium sector with a supportive government policy going ahead.

What is missing is one specific scheme from the government supporting the downstream aluminium segment. One that will help in building steps towards boosting demand and encouraging domestic manufacturing. Such a scheme for the downstream aluminium segment offering incentives in production will facilitate investment from both within and outside giving the players in this segment the much-sought-after policy support.

Historical disadvantage

Manufacturers in the downstream aluminium segment have been suffering on account of poor export incentives and have always looked towards the government encouraging domestic production to help the survival of the manufacturing sector. Unlike their counterparts in the production of primary aluminium, those in the secondary and downstream segment have historically faced an indifferent treatment.

This comes from the fact that the downstream segment procures material from primary aluminium producers at a premium over the London Metal Exchange prices and then again fights in the same space of selling finished downstream products competing with some of the largest primary producers. It is well-known that the US-China trade war has hit downstream aluminium producers the most as products from nearby countries are dumped in India, with the US market suddenly closed for them.

This comes from the fact that the downstream segment procures material from primary aluminium producers at a premium over the London Metal Exchange prices and then again fights in the same space of selling finished downstream products competing with some of the largest primary producers. It is well-known that the US-China trade war has hit downstream aluminium producers the most as products from nearby countries are dumped in India, with the US market suddenly closed for them.

Introducing non-tariff measures to lessen dependence on Chinese imports will go miles in benefitting the downstream aluminium sector in a way that its potential gets unleashed. Tougher norms will simultaneously ensure manufacturing locally gets impetus and imports come down.

Close linkages

The secondary aluminium sector can boost India’s manufacturing capabilities to a great extent if it gets the right kind of Government support. There are close linkages between the downstream segment and the manufacturing industry. Like a focused sector-specific strategy for the specialty steel sector, one focusing on downstream aluminium will help boost domestic value addition and fasten India’s economic growth.

A solid incentivised downstream aluminium sector will help maintain quality and consistency across industry be it buildings and construction, FMCG, automobiles, transportation, solar-power, aerospace, electrical, or electronics.

Aluminium is a soft and easily malleable metal, has the ability that it can be melted, casted, formed, and machined to perfection. With attributes of being light in weight, resistance to corrosion with its natural oxide coating, temperature-driven strength gaining capabilities in winter, non-magnetic properties, higher ability to absorb shock and sound besides its high value of recyclability, tick all boxes that go with a product which is used across many segments of the industry and thus deserving of a boost by the government.

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