Ahead of the budget, aluminium producers have sought steps from the government to hike import duty on primary aluminum, scrap and downstream products and rationalise costs of raw materials.
Industry bodies such as the Aluminium Association of India (AAI) and FICCI have informed the government that the aluminium sector of the country is going through a challenging phase and is under immense threat by rising imports, declining domestic market share, rising production and logistics costs.
Moreover, non-competitive energy costs and acute coal shortage for the industry have adversely hit the sustainability of the aluminium industry, Rahul Sharma, co-chairman of FICCI Committee on Mining and Minerals, said in a press statement.
Noting that aluminiums importance is next to that of steel, but policy measures are being developed and introduced to protect the domestic steel industry in the last three years, he said.
Some of the special provisions extended to the steel industry are anti-dumping duties for Chinese imports, safeguard duties of 10-20 per cent levied on steel imports, and a minimum 10 per cent increase in the basic customs duty on all steel products.
The aluminium industry continues to suffer due to the lack of such measures, said Sharma, also an active member of the AAI.
The AAI has recently written to the Ministry of Mines to provide some relief in the form of increasing basic customs duty on aluminium products from 10 per cent to 12.5 per cent and reducing basic customs duty and correction of inverted duty structure on raw materials.
The FICCI has also conveyed similar recommendations to the government.
Stating that India’s demand for aluminium is expected to double to over 7 million tonnes in the next five years, Sharma said, the industry has invested over Rs 1.2 lakh crore to enhance its capacity to 4 MTPA to cater to the increasing demand.
The sector is also one of the largest job creators with more than 8 lakh direct and indirect employment.
In the last few years, the steel industry has received policy support from the government that has enabled the sector to immune itself from global market volatility and reduce dependence on import and excess supplies.
The government support has resulted in a drop of steel imports by 21 per cent in the last three years, he said.
In contrast, a lack of similar policy support pushed the aluminium industry to post highest ever aluminium import of 23 lakh tonnes in FY19, 58 per cent of India’s demand, resulting in a forex outgo of Rs 38,000 crore, Sharma said.
In the current circumstances, the Indian aluminium industry requires the government to extend policy measures in line with what has been extended to the steel industry, he said.
Restrictive measures by China, USA and others to protect their indigenous markets from imports are making India more vulnerable as a dumping ground for primary metal, scrap and secondary products, adversely affecting the competitiveness of the domestic industry, he said.
“Hence, immediate measures like increased import duty on primary aluminum, scrap and downstream aluminium products are required along with rationalisation of input costs of critical raw material of aluminium value chain to help domestic industry retain competitiveness, Sharma said.
AAI in its communication to the Centre said the role of aluminium in energy security, infrastructure, defense, aerospace, automobile, electricity, packaging and consumer products makes it a sector of strategic importance.
However, the cost of production of aluminium metal in India has substantially increased over the past 3-4 years due to rising cost of raw materials, increase in various duties, cess and high logistic costs.
Among the largest aluminium producers like China, Canada, Russia, Middle East and Norway, India has the highest cost of production, which can be attributed to high power cost due to increasing coal prices, high cess on coal, electricity duty and logistics.