Aluminum industry seeks removal of coal cess in Budget

The aluminium industry, a key contributor to India’s V-shaped economic revival, has demanded the removal of cess on coal in the Union Budget to be presented on Tuesday next, to reduce soaring power costs for industries.

Incidentally, NITI Aayog too has highlighted the challenges of high-power costs for Indian Aluminium producers resulting in competitive disadvantage viz-a-viz global players. The cess on coal alone amounts to 20% of the cost of mining coal. As a result, despite having a competitive advantage in coal reserves, India is one of the most expensive countries to produce coal-based electricity. The coal cess has been repeatedly doubled multiple times, moving from Rs 50/MT to Rs 400/MT.

Currently, coal cess adds to the increased power cost burden rising from $8/MT to $64/MT of aluminium production costs.

Also Read | Roadmap prepared to improve coal stocks: Railways

"India’s aluminium demand is growing at a rate of 10% with economic revival of major consumer sectors like defence, aerospace, aviation, infrastructure, SMART cities, solar mission, electrical, automobiles, packaging, consumer durables among many. It has today rightly been identified amongst the Champion Sectors, where India can be a global leader.

"India enjoys a unique natural advantage to become a global manufacturing hub for aluminium on the back of abundant raw material availability for Aluminium production (5th largest Bauxite and Coal reserves) huge pool of manpower, large market and strategic geographical location. However, aluminium is a highly capital and power-intensive industry, which takes huge investments of over Rs 50,000 Cr to set up 1 mtpa aluminium smelter with alumina refinery & power plants", said Association of Aluminium Industries.

Also Read | ‘Badly hit’ by high costs, Indian metal mills seek to cut coal use

The high cess on coal for non-power industries is adversely impacting the sustainability of power-intensive industries in India, especially the Aluminium industry, where coal contributes to 40% of production cost. Commodities like aluminium have high price sensitivity in the global commodity markets. The current coal cess increases the cost of aluminium by Rs. 4800/MT (USD 64), making India produced aluminium uncompetitive in the global markets, it said.

A NITI Aayog report on “Need for Aluminium Policy in India” has also highlighted the challenges of high-power costs for Indian aluminium producers resulting in competitive disadvantage viz-a-viz global players.

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