Aluminium Association of India appeals Government to sustain MEIS scheme for the Industry, $ 5 billion exports stand on risk

The Indian aluminium industry body, Aluminium Association of India (AAI), on 4^th August’20, appealed to the Finance Minister and Commerce Minister of the country to sustain with the processing of MEIS (Merchandise Exports from India Scheme) applications through DGFT MEIS Portal and continuation of MEIS scheme with improved rate from 2% to 5% for all aluminium products to abide the current economic situation.

The letter was sent to evoke the Government anticipating slashing the fund's outlay for MEIS (Merchandise Exports from India Scheme) from around INR 45,000 crore in FY 2019-20 to INR 9,000 crore for April-December’20 and diverting these funds for other purposes.

Onwards 23^rd July, the DGFT has also blocked the MEIS module from accepting new applications to limit the issuance of any more scrips. This has generated an extremely unsteady situation for the Indian Aluminium exports which have downsized by 11% from $5.7 billion in FY-19 to $5 billion in FY-20, and further will render exports vulnerable and uncompetitive versus global players in international markets.

The Indian aluminium industry body also demanded insertion of aluminium in Product Linked Incentive Scheme and implementation of Remission of Duties or Taxes on Export Products (RoDTEP) scheme on priority for aluminium industry to make India’s aluminium exports competitive and create a level playing field for Indian exporters’ to face the global players in international markets.

The Industry being in a continuous process, all the Indian Aluminium smelters are operating in the country at around 90% capacity. The plunge in domestic demand is distressing the domestic Aluminium industry and it will take significant time for the domestic demand to rise. The zero option left for the industry to undergo is to export the Aluminium products to persist the current situation due to COVID-10 pandemic, but the prices are expected to continue to be weak due to demand slump globally.

Aluminium exports from India are grappling to remain globally competitive due to high incidence of un-rebated Central & State taxes and duties, constituting 15% of Aluminium production cost which is amongst the highest in the world. This is detrimentally impacting the sustainability & competitiveness of the Aluminium industry. This is in sharp contrast to the global aluminium industry which is heavily supported by major aluminium producing countries especially China, by way of various incentives/subsidies for raw materials, tax benefits & export tax incentives, low-interest rate loans etc. to enhance the cost-competitiveness.

Presently aluminium exports are eligible for a 2% MEIS reward rate which itself does not provide ample cushion to remain competitive against a current bearish market condition which is likely to last long. The RoDTEP Scheme (Remission of Duties or Taxes on Export Products) for exports is yet to be formulated and implemented by the Government, which was announced in September 2019 by Hon’ble Finance Minister and approved by the Cabinet in March 2020. While the domestic industry is trying its best to remain competitive, Government support is extremely crucial at this juncture to boost exports and survive this challenging phase.

However, the Government of India has identified aluminium amongst 12 Champion Sectors, where India can be a global leader and major supplier. The industry has massive potential to double the exports to the tune of $10 billion forex earning in the near future.