Blocking of online system for tax incentives to hit aluminium exports: AAI

Blocking of the online system for exporters to apply for tax incentives under the export incentive scheme MEIS has created an "extremely precarious situation" for aluminium exports, the Aluminium Association of India (AAI) said on Wednesday.

The move will further render exports vulnerable and uncompetitive, the industry body added.

The commerce ministry has blocked the online system for exporters to apply for availing tax incentives under the MEIS (Merchandise Export from India Scheme) from July 23, as the Department of Revenue decided to limit the benefits under the plan at Rs 9,000 crore for April-December 2020.

AAI urged the Centre to continue with processing of applications through the Directorate General of Foreign Trade (DGFT) MEIS portal.

"The DGFT has also blocked the MEIS module from 23rd July from accepting new applications to limit the issuance of any more scrips. This has created an extremely precarious situation for the Indian Aluminium exports which have declined by 11 per cent from USD 5.7 billion in FY-19 to USD 5 billion in FY-20, and further will render exports vulnerable and uncompetitive vis-a-vis global players in international markets," AAI said in a statement.

The aluminium body also demanded inclusion of aluminium in the product-linked incentive scheme and implementation of Remission of Duties or Taxes on Export Products (RoDTEP) scheme for the aluminium industry to create a level playing field with global players.

Being a continuous process industry, all the Indian aluminium smelters are operating at around 90 per cent capacity. The slump in domestic demand is hurting the aluminium industry and it will take substantial time for the domestic demand to pick up, it said.

The only option left for the industry is to export aluminium products to survive the current situation due to the COVID-10 pandemic, but the prices are expected to be weak due to a demand slump globally, it added.

Aluminium exports from India are struggling to remain globally competitive due to high incidence of unrebated central and state taxes and duties, constituting 15 per cent of aluminium production cost, which is amongst the highest in the world, it said.

This is in sharp contrast to global aluminium industry which is heavily supported by countries, specially China, by way of various incentives/ subsidies for raw materials, tax benefits and other incentives, AAI said.

Aluminium exports are currently eligible for a 2 per cent MEIS reward rate which itself does not provide ample cushion to remain competitive against current bearish market conditions, it added, and pitched for hiking the rate to 5 per cent.

The government has identified aluminium amongst 12 champion sectors where India can be a global leader and major supplier.