Aluminium counts on duty hike by Indian Finance Ministry

Ministry of Finance (India) is likely to relent to the demand of aluminium manufacturers to raise import duty to thwart cheap imports.

The North Block is likely to increase the import duty on aluminium to 7.5-10 per cent from 5 per cent in the next budget.

Officials said they had been concentrating on steel because of the strategic importance of the industry. However, they will look into the demands of aluminium manufacturers such as Nalco and Vedanta to double the duty from 5 per cent. The commerce ministry officials are inclined to consider a 2.5 per cent increase in the import duty on aluminium.

The North Block is also mulling over proposals to reduce the import price of alumina by cutting its duty to 2.5 per cent from 5-7.5 per cent. Manufacturers have argued that this duty anomaly leads to the finished product being taxed at a lower rate than the raw material.

Earlier, the finance ministry had rejected the demand. However, the matter has taken a serious turn with the increase in imports and threats by aluminium makers to cut production and jobs.

India's top three aluminium makers - Nalco, Vedanta and Hindalco - had planned to invest about INR 1.2 lakh crore to double output capacity from 2.1 million tonnes (mt) per annum by 2020. They have now threatened to stop investments because of a slump in the market following lower demand and dumping by foreign manufacturers.

Official records show that India imported 3.57mt of aluminium in the last three years. In 2015, imports shot up 159 per cent to 1.5mt, resulting in the share of domestic producers dropping to 45 per cent in 2014-15 from 60 per cent in 2010-11.

Local manufacturers claim that Chinese and West Asian aluminium producers are resorting to dumping in the face of recessionary trends in other markets and over-capacity.

China offers indirect subsidies such as power tariff discounts, value-added tax rebates on exports and favourable terms on loans to aluminium makers, who account for 50 per cent of the global capacity. China's exports to India have risen 200 per cent since 2011.

India's per-capita consumption of aluminium, used in aeroplanes to lemon squeezers, is about 2.2 kg compared with 25 kg in China. But demand is growing at an annual rate of about 11 per cent against global growth of 6 per cent, attracting the attention of foreign companies facing a stiff market at home.