Inspired Leadership for turbulent times and the power of Youth

The Indian economy was quick off the mark in recovering after the 2008 shocks, but amidst the weak global environment and certain country-specific challenges, conomic growth rate slowed to around !"0# for the 20$2%$& fiscal year compared with '"2# in the previous fiscal" It is to be noted that India(s )*+ grew by an astounding ,"&# in 20$0%$$" Thus, the growth rate has nearly halved in -ust three years" )*+ growth went up marginally to ."8# during the quarter through /arch 20$&, from about ."0# in the previous quarter" The government has forecasted a growth of '"$#-'"0# for the year 20$&-$2" India1s economic growth also moderated with )*+ growing by 0"$# in comparison to 8"&# in the previous financial year" 2hile there was slower consumption growth, investment recorded a sharp slowdown" 3verage inflation at ,# remained high during the year" The ship of Indian economy seems to be caught in turbulence once again"

OVERVIEW OF TURBULENCE Today globali4ation has certainly presented new opportunities but the increased interdependence has increased the vulnerability to economic turbulence" 3nything happening anywhere on the globe has some ramifications on the other parts of the globe too, the recent recession in 56, which shadowed over the whole world7 tsunami in 8apan, global economic growth slowed after a brief consolidation phase amidst fear of sovereign defaults, the )reece crisis and related problems with other countries not only affected the uro 4one but also the rest of the world, including India, are few such e9amples" )lobali4ation sure comes with lots of benefits, rosy opportunities such as open , free and une9plored markets, e9change of ideas and technologies powered to change the world for better but it also infuses cut throat competition "Through this paper we will try to evaluate some of the factors causing turbulence and the way they have been handled through the e9ample of hindalco . The Indian aluminium industry has undertaken a bold technology planning initiative to position itself to compete effectively in global markets" :ffering monetary inducement pri4es to stimulate and accelerate the achievement of scientific, engineering and technological goals has a celebrated lineage" 3 series of Industrial models have been developed over the last decade by aiming at studying in detail the technological perspective of several energy intensive industries against a turbulent time" The aluminium industry has developed this technology roadmap to respond to new market opportunities and challenges" This roadmap will help align the technological resources of industry to meet the future demands of established and emerging customers" +ower prices continued to e9ert upward pressure on the aluminium cost curve, especially in India" 3luminium smelters have been hit hard by recent fuel price

increases, as well as carbon emission costs, which are set to grow further in the coming years" )iven the pincer movement of ;/ and cost pressures, recent times have witnessed several capacity curtailment announcements in the industry globally7 and some of the players have already stopped production" The cost push continued unabatedly on the back of rising fuel and energy costs" <rent crude oil made the largest gains" This is not surprising given the increase in tensions between Iran and the rest of the world" The domestic demand for primary aluminium grew at a rate much higher than that of the global demand, profitability of the domestic players continues to remain under pressure on account of the rising input prices" 5nder this scenario, many questions arise7 how long will the global industry remain in an over-supply 4one= )oing ahead what will be the price levels for the white metal in the international market= Is India which is e9panding its capacities, both at the refinery and smelter levels, competitive enough in the global market to e9port its surplus production= >ow long will the margins of the ma-or domestic players continue to remain under pressure= In addition, the report presents ?3@ @esearch1s pro-ections for the ne9t ! years, by laying special emphasis on future performance of end-user industries, with added focus on the market situation in ?hina, alongside detailed forecasts of price movements"

FACTORS CAUSING TURBULENCE The prime goal of any business is to be sustainably profitable " there are several forces acting simultaneously to shape the profit and any turbulence in any of these forces troubles the profit and hence causes turbulence " various forces influencing the profit in case of aluminium industries $" *emand and supply 2" ;/ &" ?ost of production ." Aalue addition to raw metal !" )eopolitical conditions

'" B to rupee conversion

1. Demand and supplyC The chief driving force behind the pricing of any product is demand and supply" Drom the last few years the supply of aluminium is raising at the rate higher than that of demand due to the entry of new smelters of higher capacity in gulf countries and china" This has caused the turbulence in the pricing" The entry of new players also reflects the mar e! "#mpe!$!$#n $n !%e se"!#r" The smelters budding in gulf countries has an advantage of cheap power" The ad-acent graphs show the rise in demand and supply of aluminium " The lower most graph depicts the pricing trend and world inventory levels of aluminium" Drom all these trends it1s clear that the supply of aluminium has been proportional to its demand" The demand of aluminium has been rising considerably in growing economies because of rapid urbani4ation while in developed economy the rise in demand is almost flat" This indicates that all the emerging economies" 3ll these graphs also depicts that in past few years the emergence

of new aluminium smelters in gulf countries and ?hina has plunged the cost of 3luminium, and as new smelters pro-ects are in pipe line it is further e9pected to slip if new markets are not discovered"

6o the only rescue through this situation and key to survival is to reduce the cost of production"

&. L'E (L#nd#n me!al e)"%an*e E C;/ is the prime controller of price of non-ferrous metal in global market " 3luminium prices continue to remain bearish as uro4one debt crisis and an uncertain global recovery continue to impact demand for the metal" ;ondon /etal 9change F;/ E prices have fallen from B2000 per tone in 3pril 20$$ to B$,00 levels in /ay 20$&" 3ccording to International 3luminium Institute, global primary aluminium production in 8anuary to 3pril 20$2 has fallen marginally to 8"& mn metric tonnes F/TE from 8"&' mn metric tons in the same period in 20$$" The 2orld <ureau of /etal 6tatistics has estimated market surplus in 8anuary to /arch 20$2 at &8. kt as against a surplus of $8$."0 kt recorded for the whole of 20$$" *emand for primary aluminium for last year was .2"8$ million tonnes, 22&! kt more than the equivalent total 20$0" The forecast by the conomic Intelligence 5nit F I5E indicates that for 20$2 and 20$&, the demand for aluminium in the emerging and developing economies is e9pected to increase more than that in the advanced economies"

+. C#s! #, -r#du"!$#n. cost of production is another factor which if not controlled can create turbulence strong enough to sink the ship"

Br$e, $n!r#du"!$#n #, pr#"ess a! /#r 6imply, the >all->eroult process is the method by which alumina is separated into its component parts of aluminum metal and o9ygen gas by electrolytic reduction" It is a continuous process with alumina being dissolved in cryolite

bath material Fsodium aluminum fluorideE in electrolytic cells called pots and with o9idation of the carbon anodes" The bath is kept in its molten state by the resistance to the passage of a large electric current" +ot temperatures are typically around ,20G- ,80G?" The aluminum is separated by electrolysis and regularly removed for subsequent casting" The pots are connected electrically in series to form a Hpot line1" >indalco >irakud 6melter FIndiaE having four such pot lines at full capacity producing over $'&,000 tons of aluminum per annum" In each pot, direct current passes from carbon anodes, through the cryolite bath containing alumina in solution, to the carbon cathode cell lining and then to the anodes of the ne9t pot and so on" 6teel bars embedded in the cathode carry the current out of the pot while the pots themselves are connected through an aluminum bus-bar system" The pot consists of a steel shell in which the carbon cathode lining is housed" This lining holds the molten cryolite and alumina in solution and the molten aluminum created in the process" 3n electrically insulated superstructure mounted above the shell stores alumina automatically delivered via a sealed system and holds the carbon anodes, suspending them in the pot"

?ost of production depends upon various factors @aw /aterial +ower /an +ower @I/ :thers

@aw /aterial ?ost <reakup <au9iteJ3lumina ?oalJ+ower ?austic 6oda ?arbon 3node
Alu$ina, 2#207.00 Ano e, 1"9##.00 T.Cryolite, Lining Mat., 2452.00Al Fluori e, 1759.00 Others, 45.00 1!94.00 Cast Iron, 179.00

 3luminum Dluoride ?ryolite ?ast Iron ;ining /aterial Drom the above pie chart it is evident that power cost and cost of raw material plays vital role in cost of production"

+a. Redu"$n* CO- !%r#u*% !e"%n#l#*$"al $nn#0a!$#n and s!ra!e*$" plann$n* a. G##d !$mes are !%#se /%en y#u prepare ,#r /#rs! +ower plays a very important role in case of aluminium industries it1s a raw material in case of aluminium industries" ;ooking at the criticality of power cost >indalco acquired talabira mines located &0 km from hirakud plant" Then installed a captive power plant one of the very few power plants running on ?D<? boiler technology and first of its kind in india" Res#l0$n* C#n,l$"!s Be!/een E"#n#m$" G#als And Res#ur"e C#ns!ra$n!s T%r#u*% Te"%n#l#*y Its also noteworthy that the coal acquired from the mine is of low quality" To overcome this problem the power plant is equipped with la!es! !e"%n#l#*y CFBC 1#$lers which are designed to burn low quality coal F coals having high ash contentE efficiently" The power plant has been ranked 'th worlds best operated power plant for cleaner technology by 56 maga4ine +:2 @" 1. Imp#r! su1s!$!u!$#n #, "#nsuma1les. 3t the time of conversion from 6oderberg technology to prebake technology the rupee was rising against dollar so it was decided to import anode from china " <ut now the scenario is changing the rupee has gone through a free fall against dollar causing great turbulence in cost of production to avoid turbulence it has been decided to set up facility to produce anodes in India only" This new facility is going to cater not only hirakud plant but also upcoming plant at ;apnga :disha plant" ". A -enny Sa0ed Is a -enny Earned !%r#u*% !e"%n#l#*$"al $nn#0a!$#n.

?urrent efficiency plays key role in determining the cost of production and it1s well known fact that power outages hamper the current efficiency of entire pot-line drastically Fa 12 m$nu!es #u!a*e redu"es !%e "urren! e,,$"$en"y 1y .234.53E also during the anode effects Fan inevitable after effect of power outageE causes em$ss$#n #, 0ar$#us !#)$" *ases su"% as 6F7 CO7 "l#r#4,l#r# "ar1#ns and s#me #!%er *reen %#use *ases" These anode effects also s%#r!ens !%e l$,e #, p#! Fan electrolytic cell in which electrolysis is carried outE" In spite of so much adverse affects of outages we were bound to take outages of at least $! minutes for at least $. to $! times in a month for taking a pot inline and cut off a pot out of circuit" To avoid such outages we have in0en!ed a pneuma!$"ally #pera!ed #nl$ne s%un!$n* and pre%ea! ma"%$ne , which is used for taking a pot in line I shunting a pot without taking any power outage for the ,$rs! !$me $n !%e %$s!#ry #, alum$n$um $ndus!ry " It is an electromechanical device, which operates with the help of compresses air" To validate the functionalities, we have su""ess,ully $mplemen!ed !%$s ma"%$ne !# $s#la!e 8 !a $n* p#! $n pre%ea! $n m#re !%an +9 p#!s in the three pot lines 7 saved Rs1.: "r#res appr#)$ma!ely so far" Redu"ed !%e em$ss$#n #, a1#0e s!a!e *reen %#use *ases " d. Redu"$n* 'an -#/er "#s! T%r#u*% S!ra!e*$" -lann$n*.4 ;ow ?ost /an-power has turned India into a manufacturers paradise " >indalco has capitali4ed this opportunity to the best" The high labour cost in uropean countries has made it difficult to run @o-erstone F5KE based rolling mill profitably then, to overcome this problem the whole plant has been shifted to >irakud F:disha ,IndiaE where the manpower is readily available at much lower cost"

;. Value add$!$#n !# ra/ me!al C 3s the price of aluminium metal is controlled and capped by ;/ it is very imperative to add value to raw metal and turn them into more innovative products and create a market niche for those products " ;a" S/$m /$!% !ur1ulen"e <ack in 2008 when most of 3luminium rolling mills were suffering from heavy operational losses, hindalco novelis1 pinda plant Fbra4ilE was found to be producing good financial figures " The pinda plant produces sheets for aluminium beverage cans " Low as urbani4ation in India is increasing the demand of aluminium cans also increasing also its noteworthy that no other company is manufacturing aluminium sheets mouldable to beverage cans in south 3sia, so hindalco decided to become first man forward in setting up this kind of facility in india and capitali4e the opportunity"

;1" Te"%n#l#*$"al $nn#0a!$#n Low a days increasing prices of petroleum products has become a nightmare for transporters" It1s a big concern for railways also to keep the prices of tickets low, which could be achieved by increased efficiency, >indalco has foreseen this coming and developed railway wagons made-up of aluminium &0 # lighter than the wagons those made up of iron and under trials in ministry of railways"

2. Ge#p#l$!$"al C#nd$!$#ns. Imp#r!an"e O, G$0$n* Ba"

T# S#"$e!y.

6etting up a business in India now a days are not as simple as in other places" /any lucrative and enticing pro-ects are still waiting to see the light of the day, the +:6?: case is latest in spate" The 6outh Korean steel giant has been facing many problems in land acquisition and clearances" Aedanta nimayagiri mining pro-ect is also still far from reality on accounts of resistance from local population and tribes" >indalco faced one such challenge while land acquisition in its upcoming pro-ect in 8harkhand at 6onahatu" 2hen faced resistance from the local population afraid of their interests being -eopardi4ed, >indalco team invited the local leaders and kingpins of 6onahatu to visit @enukoot and see the development works done by the company through various ?6@ pro-ects in the nearby villages" The persons who came to visit @enukoot were so impressed from the development -obs done by >indalco in renukoot that they not only started to support the pro-ect but also requested to rechristen 6onahatu to 6onakoot" The message from all these incidents is very clear M y#u "ann#! *r#/ al#ne M " 3ctually in a country like India it1s very important to de0el#p !%e s#"$e!y /$!% !%e $ndus!ry $n !%e area and !%e 1ene,$! #, !%$s $s mu!ual " 3 developed society presents a good consumer bas and hence a new market to reap up the benefits of investment"