Aluminium industry says imports causing forex drain, urges PMO intervention

Aluminium Association of India says country is losing $4.5 bn in a scenario of growing trade deficit, domestic industry impacted

The Aluminium Association of India (AAI), which represents the entire spectrum of the domestic industry that manufactures and trades in the metal, on Tuesday apprised the Prime Minister Office (PMO) of its concerns over cheap aluminium imports. The association says inward shipments of the metal are not just hurting the domestic industry but are also creating a foreign exchange outgo of about $4.5 billion, in a scenario of growing trade deficit. 

“We have made representations to the Finance Ministry, the Ministry of Mines and now to the PMO. They have accepted the letter and are also agreeing that there is injury to the sector due to the ongoing trade war between China and the US,” a top aluminium producer told Business Standard.

Aditya Birla Group's Hindalco Industries, state-owned National Aluminium Co and Anil Agarwal-led Vedanta Ltd are the top three players of the domestic aluminium industry. Their combined annual output of four million tonnes can cater to the entire domestic market, where consumption is usually 3.1-3.6 mt. Excess production is exported by these companies. In such a situation, aluminium imports into India become totally non-essential. 

In the letter to the PMO, the association stated that the deficit in merchandise trade rose 50 per cent year-on-year to $162 billion in FY18, from $108 billion in FY17 and that imports grew 21 per cent surpassing export growth of 10 per cent during the period under review. In FY18, aluminium imports hit a peak of 1.96 million tonne, causing a forex outgo of $4.5 billion. “If imports of non-essential aluminium products is stopped it can reduce trade deficit by the same quantum ($4.5 billion) and bring it down to  2.8 percent,” said the top producer. 

There are some aluminium products used in the auto sector of the country which the domestic industry does not produce. The industry in its discussion with the government officials has clearly stated that imports of such products could continue but the non-essential imports such as those of primary or scrap aluminium need to be clamped down, said industry officials. 

“Though the government has acknowledged injury to the sector, it has not given any timeframe or indication of what kind of measures will be imposed to curb cheap aluminium imports into the country,” said the top producer. 

Quantitative restrictions on imports of the metal, imposition of end-use certification other than for the manufacture of an alloy used extensively by auto industry, minimum import price and import duty hike are some of the measures that were discussed in the meeting, said industry officials close to the development. 

In India, import of primary aluminium attracts a duty of 7.5 per cent; scrap import is at 2.5 per cent duty.