Balco initiates shut down of aluminium rolling business in Chhattisgarh2 min read . Updated: 14 Sep 2015, 04:14 PM IST
The move is expected to result in 1,000 people losing jobs
New Delhi: Bharat Aluminium Company Ltd (Balco), part of the Anil Agarwal-led Vedanta Ltd, on Monday said it has started the procedure to shut down its aluminium rolling business in Chhattisgarh—a move that will see 1,000 people losing jobs. Last month, the aluminium manufacturer had announced its decision to shut down the rolling mill in Korba (Chhattisgarh) on account of “steep fall" in the prices of the metal besides dumping from China and falling margins.
“Balco has begun the official procedure to close down its sheet rolling division and foundry at Korba. The company has issued the information to the secretary, labour ministry, government of Chhattisgarh as well as the BSE and NSE," the company said in a statement. Mining conglomerate Vedanta Ltd, earlier Sesa Sterlite, holds 51% stake in Balco, while the remaining is held by the government. It produces about 30,000 tonnes per annum of rolled products like aluminium sheets and coils. Balco has sought permission from the central government to close the unit by 8 December 2015. The closure will be as per the provisions laid down in the Industrial Disputes Act, 1947, it added.
The shutdown of the rolling division is also a part of Balco’s restructuring exercise. “This move will result in loss of around 1,000 direct and indirect jobs," it said. On reasons behind the shutdown, Balco chief executive officer Ramesh Nair said, “The closure of the rolling mill is in the backdrop of a crash in global aluminium prices and the prohibitive cost of coal to run our power plants. Worldwide, there has been a fall in energy cost but for Balco, the absence of linkage coal and regulatory issue for starting our coal mines is making operations economically unviable."
Although aluminium prices have plunged globally in the last few months, power costs are rising in India, a contrarian trend making the cost of production increasingly unviable for primary aluminium manufacturers, he added. “To operate at peak capacity, Balco requires 30,000 tonnes of coal. While the coal auctions have benefited the company in terms of allocation, the new block will meet only 10% of the peak capacity," Nair said.
Aluminium prices in the global market have fallen sharply from more than $2,200 per tonne at the beginning of 2015 to $1,600 in the current month, making exports unviable. In India, cheap aluminium from China and Middle East has shrunk market share of domestic producers, who are already struggling with rise in input cost. A staggering 55% of the domestic aluminium consumption is met through imports, forcing domestic players to operate at only 50% of their installed capacity, Balco said.
Due to non-availability of bauxite and coal, the two basic raw materials used in the aluminium and power complex, Balco is now sitting on idle capacity. The company’s current coal requirement of 15,000 tonnes to operate its power plants is being met partly by auctioned coal and partly by imports, it added. The Chotia Coal Mines, which the company bagged in the recent auction, are yet to be operational due to pending government clearances. The new 1,200 MW Power Project, which was given clearance recently, is also struggling due to paucity of coal. On the aluminium front, lack of local bauxite and dependency on imported costly raw material is making the company’s produce non-competitive in the market, Balco said.