Aluminium makers want MIP, removal of inverted duty structure

Domestic aluminium industry faces a major threat from China and West Asian countries

Vexed over the spate of cheaper imports of unwrought aluminium and scrap, domestic producers, in the run up to the Budget for 2017-18, have made a strong case for imposition of Minimum Import Price (MIP) akin to the steel products.

The demand for MIP imposition by the aluminium makers stems from the spate of cheaper imports from China and the Gulf countries. While state protected smelters in China have thrived on subsidies, ample natural gas availability has created overcapacity in aluminium, triggering dumping to countries like India where demand is on a double-digit growth. Imported aluminium today meets 51% of India's demand, forcing the domestic producers to idle 49% of their rated capacities.

"Our Budget wishlist rests on MIP and removal of the prevailing inverted duty structure. We have called for removing the anti-dumping duty on caustic soda imports. Also, the railway freight on alumina needs to come down by changing its classification. Despite being an intermediate product, alumina is treated as a metal in the list of commodities attracting rail freight", said T K Chand, chairman of National Aluminium Company (Nalco) and president of the Aluminium Association of India (AAI).

The domestic aluminium industry faces a major threat from China and countries in the West Asia with imports growing from 40% to 51% in the last six years.

Also, the prevailing inverted duty structure has worried the aluminium makers. Import duty on some key ingredients used for aluminium manufacturing was higher than the primary metal itself. While primary aluminium is taxed at 5%, both caustic soda and aluminium fluoride attract a duty of 7.5%. Coal tar pitch comes with an import duty of 5%. 

Together, alumina, coal tar pitch and Aluminium fluoride have a 44% share in aluminium production cost. Doing away with the inverted duty structure can help save costs up to $40 million a year, the aluminium makers feel. Indian aluminium industry has pointed out that some of the top aluminium producing countries and regions like China, Brazil, the US and the European Union do not have the concept of an inverted duty.

Logistics cost for aluminium making in the country is 20% of the metal production cost compared with 9% in the West Asia. Since alumna is clubbed with metals, the rail freight was unreasonably higher and this could be pruned by placing it under the raw material category.