Aluminium industry opposes import duty hike, says MSMEs, SMEs will suffer

Indian aluminium industry has opposed the government’s proposed move to raise import duty on both primary aluminium and its scrap.

In a letter addressed to the Union Minister of Commerce and Industry Suresh Prabhu, Sanjay Mehta, President of Material Recycling Association of India (MRAI), said, “Aluminium import is a necessity today. Certain critical auto components are manufactured through recycling of aluminium scrap which contains other required elements that come automatically with scrap. Primary aluminium cannot replace scrap in first place. Even if we try to replace scrap with primary aluminium, the cost of components will rise by upto 40 per cent which would increase overall production cost of auto sector.”

India recovers aluminium to the tune of around 1.2 million tonnes annually by importing scrap from various parts of the world due to poor domestic generation. Scrap recovery is largely dominated by unorganized sector players which lacks proper pick of scrap and transport to the recycling units through various scrap collection centres.

Currently, scrap import attracts duty of 2.5 per cent which the government plans to raise to 10 per cent. Similarly, import of primary aluminium import in the form of ingot attracts duty of 7.5 per cent which the government proposes to hike to 10 per cent. Prabhu said that the Commerce Ministry is considering raising import duty on both primary and scrap aluiminium to 10 per cent.

“As domestic supply chains are inadequate, the industry relies on imports of scraps. Besides being cost effective, these scraps use minimal resources and have significantly lesser carbon footprint. Most countries in the world are lowering their primary aluminum production to conserve the fast depleting natural resources – bauxite – for future use by encouraging recycling through zero import duty on scrap for recovering aluminium,” said Dhawal Shah, Director, Metco Marketing.

 Not only scrap recycling, duty will hurt those making goodsusing primary metal. “Increase in import duty will make goods manufactured through import of primary aluminium costlier,” said a senior industry official.

As against the demand of 3 million tonnes annually, primary producers including Nalco, Balco, Hindalco and Vedanta Ltd accumulatively produced 1.84 million tonnes of aluminium for the financial year 2017-18, a rise of 5.74 per cent from 1.74 million tonnes produced in the previous year.

A senior official of the Aluminium Association of India (AAI), the representative body of the primary aluminium producers, said, “Increase in import duty would certainly hurt one section of aluminium industry in India. It is, therefore, important to leave the decision on import duty hike to the government.”

Attempts to reach T K Chand, Managing Director of Nalco and President of AAI proved futile.

Kishore Rajpurohit, Director, MRAI, believes that increase in import duty on aluminium scrap would render 3500 units, mainly medium, small and medium enterprises (MSMEs) and small and medium enterprises (SMEs) would be shut down which would render nearly 2.5 million jobless. 

ON A SHORTFALL

Primary aluminium production in India (‘000 tonnes) 
 

Producers

April 2016 - March 2017

April 2017 - March 2018 Change (%) Nalco

387.42

415.00 7.11 Balco 426.14 572.65 34.38 Hindalco 405.35 408.90 0.87 Vedanta

525.38

439.57 (-)16.33 Total 1744.29 1842.92 5.65
Source: Ministry of Mines, *Vedanta has not declared commercial production from plant 2, which is currently on trail run. Hence, data of plant 2 has not been given