Indian aluminium makers push for change in duty structure

Aluminium makers in India, including Vedanta, are pitching for a correction of the prevailing inverted duty structure, under which taxes on the raw materials are higher than on the finished products, by reducing the import duty on inputs to 2.5% from 5-7.5% now and raising customs duty on the metal to 7.5% from 5%.

“Import duty on aluminium metal is only 5% in India, whereas the duty on import of its raw material varies from 5-7.5%. This has led to higher production cost for Indian aluminium, especially for alumina, which accounts for 40% of the production cost of aluminium,” said a Vedanta official.

With the gradual decline in the prices of aluminium on the London Metal Exchange (LME) over the last one year, many aluminium producing nations have come up with a series of measures to ensure competitiveness of their domestic industries. China has given tariff discounts of up to $200 per tonne for aluminum, besides a 13% rebate on VAT on exports. Aluminium prices have fallen by a whopping 37% on the LME over the last one year to stand at $1,555 per tonne in November.

“The most common tool employed by almost all countries has been to employ a non-inverted duty structure. China has reduced its customs duties for import of alumina from 7.5% in 2007 to 0% now. But India has been clinging on to the inverted duty structure for aluminium, the only base metal suffering this fate. The prevalent inverted duty structure in India is making imports of raw material like bauxite and alumina prohibitive despite a meltdown in the commodity market price,” the official quoted above said.

As a result, he said, India has lost market competitiveness on its own soil.