Primary producers continue with their plea for MIP imposition and removal of inverted duty

After the Directorate General of Safeguard Duty, India has recently rejected the plea by the primary producers to impose extra duty on imports of 'Unwrought Aluminium (Aluminium not alloyed and Aluminium alloys) citing that there is no immediate threat of "serious injury" to the domestic aluminium industry from aluminium imports from China and Middle East, domestic producers are making a strong case for imposing Minimum Import Price (MIP) similar to the steel products. They are getting ready to put up the case during Budget 2017-18.

The domestic producers argue that the cheaper imports from China and the Gulf countries which account for 51% of India's demand is forcing domestic producers to idle 49% of their rated capacities. High state subsidies for aluminium smelting in China and ample natural gas availability in Middle East has created overcapacity in aluminium, triggering an export glut to countries like India where demand is on a double-digit growth.

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"Our Budget wishlist rests on MIP and removal of the prevailing inverted duty structure. We have called for removing the anti-dumping duty on caustic soda imports. Also, the railway freight on alumina needs to come down by changing its classification. Despite being an intermediate product, alumina is treated as a metal in the list of commodities attracting rail freight", said T K Chand, chairman of National Aluminium Company (Nalco) and president of the Aluminium Association of India (AAI).

Domestic aluminium makers are also concerned over the present inverted duty structure. While primary aluminium is taxed at 5%, import duty on some key raw materials like caustic soda and aluminium fluoride stand at 7.5% and coal tar pitch comes with an import duty of 5%. It is to be noted that alumina, coal tar pitch and Aluminium fluoride account for 44% of the total aluminium production cost. Aluminium producers feel removing the inverted duty structure can help save costs up to $40 million every year.

The producers say the logistic cost for aluminium production in India is 20% of the metal production cost compared with 9% in the West Asia. Since alumina is clubbed with metals, the rail freight becomes high and this can be resolved by placing it under the raw material category.