Sunday, August 29, 2010

Do we need Vedanta's Aluminium ?


I remember peering through the rain lashed windscreen of a helicopter as we came in for landing at Enron's infamous power generation site at Dabhol. Despite the monsoon winds and accompanying turbulence, the ride was exhilirating, mostly for the amazing scenery just below us, the virgin Konkan coastline that is India's west coast. The year was 1995 I think.

The site was awash with activity, with the usual hubub of construction machinery, excavated earth and helmeted workers. The pace seemed impressive, though litigation would soon bring it to a grinding halt. As I looked around and now think back, one question has kept nagging me, in the air, on the ground, then and now. Why was this power plant here, in the middle of nowhere ?

There were many sound answers provided by the powers that be. One reason was the power plant would run on gas or naptha which could be best procured if the ships came right upto the coast and unloaded the energy source. Or it would come via pipelines from up north. There was no doubt that the state of Maharashtra needed the power and has suffered subsequently on account of the lack of it. But the fact remained that the centers of consumption were far away.

Of Course We Need Aluminium

The same question nags me when I look at the Vedanta Orissa mines controversy. Actually, its the answer which begs the more important questions. Let me tackle the development/growth one first. Do we need aluminium ? Answer, yes. We need aluminium as we need steel and other metals, our per capita consumption numbers (1 kg vs 25 kg in the US) are quite low. We are a growing economy and we have a lot of construction and building to do.

Great. Now, the second question. Do we really need to manufacture aluminium and mine raw material bauxite in India ? Not necessarily. A shortage of aluminium is served through imports too. Even China has turned net alumunium exporter. And fact is, there is global overcapacity. Admittedly, this overcapacity may not last for ever. But there is nothing that says it is India's or Orissa's duty to fill the gap. Particularly when the Middle East is ramping up capacity furiously as we speak. As other country's might later.

Aluminium is a very power hungry process. So, you have to set up power plants. Vedanta has built a 1215 Mega Watt Captive Power Plant (CPP) at Jharsuguda in Orissa for its 0.5 million tonne aluminum plant. Vedanta also (proudly) claims this is the largest captive power plant in India. Sure, to make aluminium, not to solve Orissa's power problems. Not that Orissa's power problem is Vedanta's problem. But it tells you what a energy guzzler this metal is.

India Mines, Others Consume

Give or take, total global aluminium capacity is around 53 mt. Production this year will be around 42 mt and consumption around 41 m. So there is clear overcapacity at this point. But like I said before this will catch up. Back home, India consumes around 1.2 mt but produces around 1.3 mt. So we don't even consume as much as we produce at this point. Yes, this could change in time.

Its the same story in iron ore. I was looking at Sesa Goa's (owned by Vedanta) sales numbers. Sesa Goa, the 13th largest global producer, turned out 20 mt of iron ore last year. Where do you think all this went ? Well, an amazing 17.5 mt went to China and Taiwan. And how much did India consume ? Only 1.14 mt !!! So, all the ecological destruction in Goa and Karnataka only ensures that Chinese steel furnaces are kept burning. By the way, I am not saying its good or bad.

But we must ask nonetheless.Why are we mining so recklessly (and illegally) for natural resources whose final product we don't even consume, or at least manufacture. Well, that is a tough one. Because India is a poor country and needs development, including in the realm of manufacturing. And arguably, if you are a developing nation, then the mining of your natural resources too contributes to your income, as a country. And some folks benefit, somewhere.

Asking The Right Questions

But the question must be asked with greater precision today. Which industries, which regions or the country, what's the net value addition , how ecologically sensitive and so on ? An industrialist who hails from the Konkan region (and I know well) says manufacturing has no place there. "They should go to the hinterland of Maharashtra and take the coal or whatever they need by rail to those places," he told me last week.

What about the Konkan region, I ask. It needs tourism, educational institutes, industries which do not damage the ecology, he says. But like in Orissa, such industries may not come there willingly. Which leads to the next, more tricky set of questions I will pose and then attempt to answer in the next post. Who really benefits from the aluminium, steel and iron ore mines or such industry in our country ? And more importantly, is there a solution to Vedanta like situations ?

To Be Continued..

4 comments:

Dipshikha on 1:28 pm said...

Good read Govind, though your second blog on the topic will address the more important issue - Development that is not inclusive and which may tear apart this nation.

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