After Indian iron ore mines and steel factories, it’s now the country’s foundry units’ turn to face the prospect of losing business.
An import tax recently imposed on metal scrap by the Government of India now threatens to cause multi-million-dollar losses for these foundries since their export business is likely to be affected, giving an edge to other countries such as China and Taiwan.
Metal scrap is the only raw material for producing critical equipment for the heavy engineering sector.
The 2.5 percent tax has been implemented from May 8 this year on all types of ferrous and non-ferrous scrap imports including aluminum, steel, stainless steel, and iron. Also, 4 percent of special additional duty (SAD) was levied on brass scrap – a raw material used for manufacturing brass artifacts that are very popular in developed countries.
According to a report in the Business Standard, the ferrous and non-ferrous scrap imports are necessary since India did not generate adequate metal scrap to meet the annual requirements to produce about 10 tons of castings annually.
Foundry units manufacture cast equipment from both ferrous and non-ferrous metal for use in automotive, railways, heavy machinery, textile, cement, agro, power, oil and natural gas applications.
While the fears of exports being stymied are real, the foundry business faces lower demand on the domestic front too, since last year. Being that primary metal costs $300-350 per metric ton more, metal alloys are produced through the scrap route in order to make the finished products cost-effective.
What hurts, according to those in the business, is that there is no such import duty on ferrous and non-ferrous metal scrap in other countries, thus giving them an undue advantage.
Trade associations are now petitioning the government to call off the import duty, calling it a “counter-productive step” that will not only dissuade the usage and trade of ferrous and non-ferrous scrap, but also add immensely to carbon emissions.
The Metal Recycling Association of India, for example, has urged the government to abolish the duty levy to protect the metal recycling industry.
Sohrab Darabshaw contributes an Indian perspective to MetalMiner.