Even before India formally signs the Regional Comprehensive Economic Partnership (RCEP), the domestic copper producers have flagged concerns to the Union government on the plight likely to befall them.
The domestic copper players are bombarded with swelling imports that now account for 38 per cent of the country’s consumption. The swarm of imports, they point out is redundant since India is already self-sufficient in copper wires and rods. Free Trade Agreements (FTAs) signed by India with ASEAN countries was driving imports. And, with hectic negotiations on RCEP underway, the copper producers feel signing of RCEP will lead to easing duties further, resulting in higher import volumes.
“India has multiple rounds of discussions (for RCEP) and walking out is next to impossible. The Government of India is contemplating to keep 10 per cent of the items under exempt list while opening up 90 per cent of the goods. We want that key metals like copper and aluminium may be kept in the negative or exempt list of RCEP”, said Sanjay Karn, general secretary, Indian Primary Copper Producers Association (IPCPA).
Indian has a nameplate capacity of one million tonnes (mt) in copper, exceeding the country’s demand of 0.65 mt. Major players like Adani Group and Vedanta Ltd have firmed up plans to install new smelting units.
RCEP is an economic bloc of 16 nations- China included. India’s trade with RCEP countries is assessed at $100 billion of which bilateral trade with China alone is valued at $50 billion whilst ASEAN countries having FTAs with India boast of trade valued at $13 billion.
“The other countries in RCEP are already profiting at India’s expense. If RCEP happens, it will be very harmful for the copper industry. We have nothing to gain from other nations in the RCEP. Copper tubes were once a thriving industry until ASEAN happened. Now, there are hardly two to three players in this space, down from 25-30 previously”, Karn said.
For primary producers of refined copper like Hindustan Copper, Hindalco Industries and Sterlite Copper, the woes have magnified owing to inverted duty structure. Import of copper concentrates is taxed at 2.5 per cent whereas finished products find their way into India at zero duty from ASEAN-FTA countries.
Under India-ASEAN FTA, majority of copper products are placed in the negative list. However, the rate of import duty on copper wires has progressively dived from five per cent in 2010 to nil in 2017. Indian producers are constrained to import copper concentrates due to lack of good quality deposits inside the country but finished products storm unabated amid zero duties. Beginning 2010 until now, import of copper wires has soared by 94 per cent CAGR (compounded annual growth rate).
The domestic copper industry fears RCEP will aggravate imports of wire and rods and widen the trade deficit, depreciating the value of Indian currency. They are also sore over China circumventing the lax Rules of Origin (RoO) criteria to reroute goods, taking advantage of India’s duty free pacts with ASEAN nations. To pile up the woes of domestic copper makers, China via its ‘National Sword Policy’ is curbing imports of metal scrap- a phenomena that could escalate scrap dumping into India.