Make in India Comes to the Rescue of India’s Aluminum Industry

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Indian aluminum players are awaiting the annual ritual of the budget release at the end of the month. Domestic manufacturers want to know whether the Indian government manages to correct the anomalies in the existing tax structure to even out the playing field between Indian and foreign manufacturers.

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Aluminum imports have been steadily increasing over the last couple of years, leading to cries of foul play from Indian manufacturers. China is one of the biggest importers, as reported by MetalMiner.

A research report by InfodriveIndia.com recently said that Indi’as total imports of aluminum and aluminum articles had gone up in December 2014 by about 13%. Imports of aluminum waste and scrap had also grown by nearly 12% month-on-month during December.

Using import duties to protect the interests of domestic players is nothing new in India’s aluminum sector. In 2013, the government imposed a “safeguard” tax to protect the local industry. The present Indian government’s “Make In India” program has sharpened the focus on such “abnormalities” existing in the taxation system, and the need to give domestic players a more level playing field.

The finance ministry is reportedly looking at ways to do away with inverted duty structures in a range of sectors such as steel, copper and aluminum (). Inverted duties are a term for when the import duty on finished products ends up lower than the duty on raw materials needed by local manufacturers, thus making it financially viable for the latter to compete. This sometimes completely skews the market economy of a particular sector.

The research report said the total value of imports of aluminum waste and scrap in December came to $143.6 million, which was 11.76% higher than the imports of $128.5 million in November. The major importers were Saudi Arabia, The United Arab Emirates, the UK, USA and Netherlands.

On the other hand, the import value of aluminum plates, sheets and strip in December was $41.03 million, 13.14% lower when compared to November imports of of $47.23 million. Month-on-month, the value of imports had dropped by US $6.20 million. The top importers of aluminum plates, sheets and strip to India were China, Korea, Canada, the UK and Bahrain, the report said.

The present dynamics of this business are such that while India’s cheap aluminum imports have been going up, a fall in local demand for the metal in the last two years due to a stagnant economy has led the Indian aluminum sector to export its surplus. Exports had touched 523,802 tons by mid-December.

India’s aluminum demand declined by about 3% in 2013-14. However, many analysts, including research agency CRISIL, believe that this is likely to pick up this fiscal year as requirements from sectors such as auto and housing will go up because of the Make in India program.

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