Metals and mining major Vedanta Ltd may announce significant job cuts, as its aluminium business came under severe pressure due to rising imports and falling metal prices globally.
Billionaire Anil Agarwal-controlled Vedanta has already reduced the production of aluminium to a third of its capacity at its main plant, despite the global metal output growth in January-June period recording its fastest growth in five years.
The world's largest aluminium producer China has increased its output by 18% compared to global growth of 10.3%.
With aluminium prices trading at about six-year lows at the London Metal Exchange (LME), domestic mining firms such as Vedanta and Hindalco are seeing their profit margin decline by 75%.
"If at any point of time any further debacle happens, (like the) LME crashes down further, obviously the domestic aluminium producers will have no room to operate," Abhijit Pati, chief executive of Vedanta's aluminium business, told Reuters.
"We'll have to go for some drastic measures. We have already started making austerity drives, but that will not suffice. We are going into a huge amount of headcount reduction."
However, the large scale job cuts are yet to be finalised, Pati said. Currently, Vedanta employs 17,000 people in its aluminium division.
Vedanta, India's largest producer of aluminium, is currently operating its largest plant in Odisha at 32% of its overall capacity. The plant has a capacity to produce 1.6 million tonnes of aluminium annually.
Currently, India meets a significant part of its annual aluminium needs of 3.5 million tonnes through imports. The country's imports of the metal went up by 4% in April-June period compared to same quarter a year ago.
The domestic aluminium industry is urging the government to double the import duty to 10% to give a boost to local production.
Vendanta is still planning to increase aluminium production to 1 million-1.2 million tonnes in the current fiscal year despite lower metal prices. It's output stood at 860,000 tonnes last fiscal year.
"If we are able to survive, if we are able to sail through, we would like to expand," Pati said.
For the fiscal year ending March 2015, Vedanta posted a loss of Rs.15,645 crore against a profit of Rs. 6,298 a year earlier. It reported a stand-alone net debt of Rs. 36,796 crore.
