Sterlite Industries (India) Limited - Sterlite Industries India Ltd.

Production Volume and Mix
Production volume has a substantial effect on our results of operations. We are generally able to sell all of the products we can produce, so
our net sales generally fluctuate as a result of changes in our production volumes. Production volumes depend on our production capacities,
which have increased in recent years across all of our businesses. For our mining operations, production volumes also depend upon the quality
and consistency of the ore. Per-unit production costs are significantly affected by changes in production volumes in that higher volumes of
production generally reduce the per-unit production costs. Therefore, our production volumes are a key factor in determining our overall cost
competitiveness. We have benefited from significant economies of scale as we have increased production volumes in recent years, though
production volumes for a number of our primary products in our copper and aluminum businesses were flat or decreased between fiscal 2008
and fiscal 2009 due to planned and unplanned shut downs. The following table summarizes our production volumes for our primary products
for the last three fiscal years:
Year Ended March 31,
Product 2007 2008 2009
(tons)
Copper Copper cathode (1) 312,720 339,294 312,833
Copper rods 177,882 224,758 219,879
Zinc Zinc (2) (3) 348,316 426,323 551,724
Lead 44,552 58,247 60,323
Aluminum Ingots 182,921 195,795 172,263
Rods 72,981 101,183 127,120
Rolled Products 57,287 61,693 57,399
Total Aluminum 313,189 358,671 356,782
Notes:
(1) Copper cathode is used as a starting material for copper rods. Approximately one ton of copper cathode is required for the production of
one ton of copper rods.
(2) Includes production capitalized in fiscal 2008 of 1,154 tons.
(3) Excludes tolled metal in fiscal 2007 of 251 tons.
In addition, the mix of products we produce can have a substantial impact on our results of operations as we have different operating
margins in each of our businesses, and within each business our operating margins vary between the lower margins of primary metals and the
higher margins of value-added products such as copper rods and aluminum rolled products. For example, copper cathodes are converted in our
copper rod plant into copper rods, a value-added product which has a higher margin than copper cathodes. As copper rods have higher margins,
we endeavor to sell as large a percentage of copper rods as possible. As the production volume of our various products fluctuate primarily
based on market demand and our production capacity for such products, the percentage of our revenue from those products will also fluctuate
between higher and lower margin products, which will in turn cause our operating income and operating margins to fluctuate.
Periodically, our facilities are shut down for planned and unplanned repairs and maintenance which temporarily reduces our production
volume.
Government Policy
India Customs Duties
We sell our products in India at a premium to the LME price, due in part to the customs duties payable on imported products. Our
profitability is affected by the levels of customs duties as we price our products sold in India generally on an import-parity basis. We also pay a
premium on certain raw materials that we import or which are sourced locally but which are priced on an import-parity basis as a result of
customs duties, with copper concentrate, coal, petroleum products, alumina, carbon and caustic soda being the primary examples. The
following table sets forth the customs duties that were applicable for the periods indicated:
January 22, 2007 April 29, 2008 to January 3, 2009
to April 28, 2008 January 2, 2009 to present
Copper 5.0% 5.0% 5.0%
Copper concentrate 2.0% 2.0% 2.0%
Zinc 5.0% 0.0% 5.0%
Aluminum 5.0% 5.0% 5.0%
73