Union Budget must include reforms to revive aluminium Industry: Aluminium Association of India

Mumbai: Aluminium Association of India (AAI), the industry body representing aluminium manufacturers, has written to the ministry of finance urging the government to increase the basic custom duty on primary aluminium and aluminium scrap to 10% and to eliminate the cess on coal to revive the sector from the pandemic-led slowdown.

“Indian Aluminium industry is going through a challenging phase and is under immense threat by rising imports, declining domestic market share, increasing production and logistics costs,” said AAI in a letter on Tuesday.

Moreover, the non-competitive energy costs and current precarious situation due to acute coal shortage for industry have adversely affected the sustainability of Indian Aluminium industry, the letter said.

The slump in domestic demand due to Covid-19 pandemic is hurting the domestic Aluminium industry and it would take substantial time for the domestic demand to recover, the industry body said in the letter.
“The burden of Central & State taxes & levies amount to around 15% of Aluminium production cost giving domestic industry a significant disadvantage compared to its global peers,” the letter said.

The letter highlighted the issue of rising imports amid increased domestic production.

“Indian has sufficient domestic capacity of 4.1 mtpa to cater the country's Aluminium demand of around 4 mtpa. Despite this around 60% of India’s demand is being met through imports, resulting in declining domestic market share from 60% in FY11 to 40% in FY20,” the letter said.

As per AAI the Import surge has been driven by free trade agreement partner countries, scrap imports and dumping of cheap Chinese imports. “Total imports including scrap for period FY11-20 has grown at a CAGR of 10%. Despite sufficient domestic capacity, 58% of India’s demand is being met through imports,compared to 40% in FY11.”

The industry has written to the finance ministry to Increase the basic custom duty on Aluminium scrap at par with primary metal to proposed 10%, as in line with other non-ferrous metals like copper, zinc, lead, nickel, tin have the same custom duty for scrap and primary metal.

“Government support to utilize accumulated Clean Energy Cess Fund for funding the installation of Flue Gas Desulphurisation (FGD) for operational Captive Power Plants (CPPs) to comply new emission norms and waiver of custom duty on the import of equipments required for installation of FGD,” the letter said.

The industry is also seeking an elimination of cess on coal.

“This steep hike in coal cess had adversely impacted the sustainability of the Aluminium industry being a highly Power intensive industry, where coal contributes to around 40% of Aluminium production cost,” the letter said.