Background
Aluminum production in
India commenced in 1938 with the commissioning of Aluminum
Corporation of India's (Indal) plant in technical and financial
collaboration with Alcan, Canada having a capacity of 2,500 ton per
annum. The plant started with sheet production using imported
aluminum ingots.
In 1959, Hindustan
Aluminum Corporation (Hindalco) was set up at Renukoot in UP with
an initial capacity of 20,000 ton per annum.. Malco, a public
sector undertaking was commissioned in 1965 with a capacity of
10,000 ton per annum. This was followed in 1975 by Balco, a PSU
with a similar capacity of 10,000 ton. Finally in 1987, National
Aluminum Company (Nalco) with a capacity of 0.218mn ton was
commissioned in technical collaboration with Pechinery of
France.
In the 1970s, the
government regulated and controlled the aluminum industry through
price distribution controls and barriers to entry. The 1970
Aluminum Control Order compelled the Indian companies to sell 50 %
of the aluminum produced for electrical purposes.
The government
decontrolled the industry in 1989 with the removal of the Aluminum
Control Order. The industry was de-licensed in 1991 and was allowed
liberal import of capital goods and technologies.
The demand for aluminum
grew 6 % in the 1980. Aluminum demand post liberalization
registered a growth rate of 12%. This coupled with the increase in
the global aluminum prices ($1800/ ton in 1994) led to increased
investments in this sector.
The downstream capacity
in the aluminum industry spurted due to sufficient duty
differential between aluminum ingots or primary metal and value
added downstream products. In March 1993 while the duty on aluminum
ingots was 25% the duty on downstream products was 70%. However
with the change in the tariff structure undertaken in the 1997
budget, duty on semi-fabricated metal was lowered to 25%. This
change adversely affected the fortunes of the downstream
producers.
