In the last budget, custom duty on export of Iron Ore Lumps and Chromium Ores was reduced from 30% to 0% but custom duty on export of Bauxite Ore was reduced from 20% to 15% only, which was inadequate. This relief may be too little, too late, to rejuvenate the Bauxite Export Industry, which is already battling headwinds from the meltdown in the global commodity markets. Therefore, custom duty on export of Bauxite Ore should be reduced to zero, demanded Mr. C.K. Joshi, Chairman of Gujmin Industry Association.
India’s Bauxite Reserves
Bauxite is the primary ore for making Aluminium metal. Despite limited prospecting, the high threshold of quality and dated surveys India is known to be endowed with the 5th largest Bauxite reserve base in the world of 3 billion tons. There is still a lot of potential for discovering a larger Bauxite resource base in India through modern and scientific prospecting methods. Furthermore, India currently produces less than 2 million tons of aluminium per annum, at India’s current rate of aluminium production and consumption, India’s known Bauxite reserves will last for more than 300 years.
Indian west coast Bauxite a poor cousin of the country’s eastern deposits
More than 80% of India’s Bauxite reserves are located in the states of Orissa and Andhra Pradesh, which explains why nearly all of the integrated Alumina & Aluminium plants with copious captive Bauxite reserves are situated in east & central regions of the country. The west coast of India is peppered with non-contiguous deposits of Bauxite, none of which have the quality or the critical mass to support an Alumina Refinery or an integrated Smelter. The Kutch region of Gujarat is known to have Bauxite of good quality which has for the last six decades been set aside by the Government of Gujarat for an Alumina Refinery. Inferior Bauxite from the Jamnagar region of Gujarat and from Maharashtra is unusable by Indian metal manufacturers on account of its low Alumina content and high Silica content, several Aluminium producers have refused to source material from the west-coast even to tide over their rare & temporary raw material disruptions; from a domestic perspective, this Bauxite is waste-ore. Certain small mine owners and export aggregators have over the last 10 years taken the initiative to mine and export these inferior ores and have succeeded in developing a sustainable “mining industry” which generates direct and indirect employment in mining, transportation and stevedoring to more than 50,000 labourers in Gujarat & Maharashtra.
Exporting to China (for a change instead of importing)
China produces and consumes nearly half of world’s Aluminium for which it needs to import bauxite. Being “Resource-poor”, Chinese refineries have been configured to use various blends of bauxite regardless of their inferiority, energy inefficiency, and environment issues. Indian West coast of bauxite which is not used by Indian metal manufacturers is exported to China.
Indian Bauxite exports living on a prayer
China has may other sources for importing Bauxite namely Malaysia, Australia and Guinea. Indian Bauxite comprises of only 14% of the Chinese Bauxite import requirements and is on a weaker wicket as compared to other competing countries mainly on account of a disproportionate export duty and dwindling quality.
While Australia increased its Bauxite exports to China by 27% from 15.04 million tons in 2014 to 19.14 million tons in 2015, Malaysia on the other hand increased its exports to China by an astonishing 700% i.e. from 2.82 million tons in 2014 to 22.36 million tons in 2015. Australia imposes no export duties on Bauxite, whereas Malaysia imposes a nominal one.
A better part of these export surges by Malaysia & Australia represent opportunities lost by India, relegating it to distant third ‘also ran’ position.
Whereas on one hand the recent budget abolished export duties on other ores such as Iron Ore Lumps and Chromium ores (from 30% to zero), Bauxite ore was once again accorded a pitiful & insufficient reduction of duty from 20% to 15%. This “relief” may be too little too late to resuscitate the Bauxite export industry which is already battling headwinds from the meltdown in the global commodity markets.
| Country | 2015* |
| Mn tons | % share |
| Malaysia | 22.36 | 42% |
| Australia | 19.14 | 36% |
| India** | 7.42 | 14% |
| Others | 4.23 | 8% |
| Total | 53.15 | |
While Aluminium markets have been in a funk, the corresponding price pressures on Raw Material too have been brutal; the Chinese predilection for lower priced and comparatively better quality Bauxite has resulted into an existential threat for Indian Bauxite exporters.
In any case, Chinese companies have been making massive investments into Guinea (which holds the largest Bauxite reserves in the world) for acquiring rich Bauxite resources and in the long-run the writing is pretty much on the wall for other Bauxite exporting countries. But even the little evanescent opportunity that Indian Bauxite exporters have to sell the low-grade material before the Chinese investments in Guinea fructify is now seriously under threat.
An industry which has provided more than USD 700 million forex inflows over the last three years, lead to Royalty accruals of more than Rs.200 Crores, over 500 Crores as indirect taxes and generated more than 50,000 jobs is in dire straits.
While Indian Bauxite exporters are already handicapped on account of trying to make the most of the Bauxite ore that is not domestically used, they need all the encouragement in terms of allotment of mineral resources, provision of infrastructure, the lowest hanging fruit of which could be the complete abolition of export duty, these measures could go a long way in resuscitatingIndia’s competitiveness is the global Bauxite export market.
For further information, please contact Mr. C.K. Joshi on Cell: 09327010826, Email: gujmin@gmail.com
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