Secondary metal processors seek duty exemption on scrap import

The secondary metal processing industry's condition worsened since last year when the govt levied 2.5% import duty on scrap

Secondary metal processors, including manufacturers of artefacts, utensils and other household items, have urged the government to exempt import duty on scrap to save the industry from closure.

Employing over one million people, the secondary metal processing industry’s condition has worsened since last year when the government levied 2.5 per cent import duty on scrap. Since the import of finished products from countries with Free Trade Agreements (FTAs) and special treaties with India attracts no duty, import of raw material becomes costlier than finished products.

India’s secondary metal processing units have therefore gradually gone sick. Also, a steep rise in raw material prices has made the cost of production higher. These units have failed to pass on the increase in raw material prices to consumers due to a slowdown in demand from their end.

“Because raw material duty is higher than finished products, no Cenvat credit can be claimed for duty paid on inputs, which is blocking working capital and, in turn, hurting the financial health of processors,” said Rohit Shah, director, Bombay Metal Exchange.

Most importantly, special additional excise duty (SAD) has been a big barrier for secondary metal processing units and has proved a hurdle in their growth.

India's secondary metal manufacturers predominantly rely on imported scrap as the prime raw material as local availability is poor. However, across industry, the percentage of average value-addition achieved from scrap sorting, smelting and production of secondary ingots/billets ranges from 15 per cent to 20 per cent. Apart from that, FTAs signed with neighbouring countries have threatened the existence of SMEs and cottage industries involved in the production of antique pieces and household brass articles.

India imported over 37,000 tonnes of secondary aluminium alloy ingots during 2012-13 from Thailand alone. Whether it is brass rods or secondary aluminium alloy ingots, raw materials (scrap) and their cost price are usually common for producers in India and South East Asia, which is procured largely through imports.