India parliamentary committee pitches for raising import duty on cheap aluminium scrap

In a bid to protect domestic firms, a Parliamentary Committee has suggested the government to raise import duty on aluminium and raised "serious concern" on "adverse impact" of cheaper imports on the profitability of state-run Nalco .

The Committee on Public Enterprises, chaired by Shanta Kumar, also rapped the state-run aluminium maker for failing to achieve its capacity utilisation programmes.

"Committee notes with serious concern that import duties on aluminium and aluminium scrap are having an adverse impact on the profitability of NALCO's production business. As deposed by Mines Secretary, out of total aluminium consumption in the country, 55 per cent is met from aluminium scrap and 45 percent through aluminium, on which the import duties are 2.5 per cent and 5 per cent respectively, resulting in cheap imports from countries like China," it said.

These factors have led to Nalco and other domestic firms running in loss as well as losing the drive to increase their capacity utilisation since investments on the same is not likely to lead to profits, it added.

As a result, the companies including Nalco are going for cost-cutting measures as well as retrenchments and laying-off workers to survive, it pointed out. The panel said it feels that apart from survival of the industry, this is an alarming scenario for factory workers and hence an urgent action from the government is warranted.

"They (Committee) have been given to understand that Mines Ministry has already been pursuing the matter to raise import duty to 10 per cent on both aluminium and aluminium scrap with the Finance Ministry as well as the Prime Ministers Office (PMO)." This is on the basis of the argument that duty on all other non-ferrous metal scrap like copper, nickel, lead, tin and zinc is at par with the prime metal.

"The committee agree with the move in the interest of aluminium companies like Nalco since their domestic market must not be dominated by cheap metal and metal scrap imports. The committee desire the Mines Ministry to convey their recommendation to the Finance Ministry and PMO. The committee desire to be apprised of the progress on the matter in due course," it said.

On capacity utilisation by Nalco, the committee said the details of target of capacity utilisation and actual production from 2010-11 till date shows that none of the products of NALCO could achieve target capacity utilisation in any year.

The committee feels that Nalco could have achieved higher capacity utilisation had they taken measures within their control for instance timely maintenance of its machine parts.

"Mines Secretary, however, apprised the committee during evidence that the capacity utilisation of the company was deliberately kept low at 71 per cent to optimise realisation keeping in view the sluggish demand for the metal, depressed market situation, etc," it said.