Aluminium utensils industry feels the heat of competition

The aluminium utensils industry in Jagadhri in Haryana is feeling the heat of competition from low-cost substitutes, with the share of aluminium utensils in the utensils industry shrinking viz-a-viz stainless steel. As a result, capacity utilisation has come down to 60 per cent in the last few years. The cluster comprises around 100 aluminium utensils manufacturers, a majority of them in the micro, small and medium enterprise (MSME) category.

The industry wants the state government to offer protection with regard to the levy of VAT/CST and the Central government to abolish Central excise duty, apart from classifying aluminium utensils in the exempted category in the proposed Goods and Services Tax (GST).

Tarun Goyal, president, Federation of All India Aluminium Utensils Manufacturers, told Business Standard, "The overall percentage of aluminium in the utensils sector is shrinking viz-a-viz stainless steel, mainly on account of low-cost stainless steel in grades other than 302/304, which have a very low nickel and chromium content, even though aluminium has overriding benefits compared to stainless steel."

The aluminium utensils industry is also battling several myths about health issues pertaining to the use of aluminium for cooking, he said, though "it has been conclusively established that these myths are not true."

"Large multinationals such as Coco-cola and Pepsi widely use aluminium for their beverage cans for safely and hygienically selling beverages worldwide. The use of aluminium in pharmaceuticals and food packaging again negates the myth about health issues pertaining to the use of aluminium. Moreover, most medicines prescribed for stomach ailments contain salts of aluminium," he added.

Bharat Garg, managing director, J K Metal Industries, said, "Initially there was a spurt in demand, so capacity addition was on at a hectic pace across the country. The total installed capacity of all units combined across India is about 1.7 lakh tonnes per annum, while it was 1.1-1.2 lakh tonnes per annum five years back."

"It is evident from the data that supply overtook demand, leading to under-utilisation of capacity. The units comprising MSMEs are utilising about 60 per cent of their installed capacity," he added.

Taxation issues are also involved, Goyal added. Jagadhri's aluminium utensils industry sources all its raw material from outside Haryana and also sells the finished utensils outside the state. The incidence of VAT/CST, compounded by ever-increasing transportation costs, has had a retarding effect on growth, even after the implementation of unified rates of taxes for all commodities under the various state VAT Acts.

He said, "Successive governments in Tamil Nadu have continuously exempted aluminium utensils from VAT/CST since there is a concentration of aluminium utensils manufacturers in that state. Similarly, Rajasthan and Gujarat have also protected the local stainless steel industry."

Goyal said it was essential that the Haryana government gives the aluminium utensils industry protection with regard to the levy of VAT/CST and the Central government abolishes central excise duty and classifies aluminium utensils in the exempted category in the proposed GST that the government is committed to implement.

Manufacturers should not restrict themselves to utensils only but should add more products like containers meant for carrying food, he suggested.