Duty Cut Not To Aid Hind Copper In The Near-Term

Governments decision to cut import duty on copper concentrates has given no immediate relief to Hindustan Copper (HCL) but would help as the firm expands smelter capacity, analysts said yesterday.

Starved for cash, the state-owned HCL has been looking to tax reliefs from the government. Finance minister P Chidambaram in his budget for fiscal 1997-98, cut customs duty on copper concentrates to 5 per cent from 10 per cent but made no changes in tariffs on the metal and products. As a result, HCLs raw material would become cheaper if it imports concentrates, but the firm is not importing right now.

 

On the other hand, HCL did not get the tariff protection on ts final product that it was looking for. The company had urged the government to raise import duties on copper products to offset a cash crunch resulting from high production costs and a steep fall in London metal prices.

We stand at the same place. There is no change in customs tariffs, a HCL official said. The company in a letter to the mines ministry had demanded that customs duty be raised to 60 per cent from 30 per cent for

copper cathodes and wire bars and to 65 per cent for wire rods.

HCL, the sole primary copper producer in the country, has a production capacity for 47,500 tonnes of refined copper and currently operates its mines and plants at full capacity.

Analysts said the copper content in Indian ore is very poor, leading to higher costs. HCL officials said profits have been eroded as the firm has had to cut prices to match imports.

We will not get any immediate benefits from changes in import duties on copper concentrates because we are not importing any concentrates, said the HCL official.

The official said HCL would benefit when it expanded its copper smelter and refinery at Khetri in Rajasthan to 100,000 tonnes from 31,000 tonnes at a cost of nearly Rs 5,300 crore.

Officials said HCL will use imported copper concentrates for its expanded capacity. The move (import duty cut) will benefit companies like

Sterlite Industries, which imports concentrates, said Prakash Patra of investment firm Peregrine Securities.

Patra said there was no case for increasing customs duties, as demanded by HCL, when duties on other products were being brought down in line with global trends.

Company officials said the Khetri project was expected to be commissioned by the end of 1998 and it was likely to earn an additional profit of 1.6 billion rupees annually. A mines ministry spokesman said government approval for the expansion of the Khetri complex was at an advanced stage.

The reduction in customs duty on copper concentrates from 10 to five per cent will have a definitive impact on the profitability of HCL, the ministry said in a statement. Two stages have been completed and a third stage clearance was coming up later this month. It will then go to the cabinet, said the HCL official.

HCLs loss during April 1996-March 1997 period was expected to be substantial. Despite cost-cutting, HCL had, up to December 1996, nearly Rs 1,000 crore, company officials said.

The landed cost of imported copper depends on copper prices on the London Metal Exchange (LME), prevailing customs duty rates and the rupee-dollar exchange rate.

Officials said in the past few months the LME price of copper fell by $600 per tonne compared to prices that prevailed at the corresponding period of the previous year.