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  • Union Budget 2020-21: Indian Aluminium Sector Needs to be Nurtured for an Atmanirbhar Bharat with Global Competitiveness

    Published on January 20, 2021

    India is one of the fastest growing economies and fastest emerging markets in the world and Aluminium Industry plays a vital role in nation’s economy and the country’s vision for an Atmanirbhar Bharat. Aluminium is an essential commodity for various other industries / SMEs due to its critical role in diversified applications crucial for economy like energy security, national defence, infrastructure, electrification, aerospace, automobile, consumer durables, packaging etc.

    However, the Indian Aluminium industry is going through a challenging phase and is under immense threat by rising imports, declining domestic market share, increasing production and logistics costs. These challenges have been further compounded by the COVID-19 pandemic which has adversely impacted the domestic demand for aluminium. At the same time, the industry is not able to compete effectively in the global markets as the burden of Central & State taxes & levies amounting to ~15% of Aluminium production cost puts the domestic industry in a significant disadvantage compared to its global peers.

    In this context, the Indian Aluminium industry in its representation from Aluminium Association of India has urged the Union Government for support in the Union Budget 2021-22 through a number of demands. 

    First is the need to increase the basic custom duty on Primary Aluminium and Aluminium Scrap to 10%. This is necessary to battle current challenges being faced by the industry in sustaining the share of the domestic aluminium demand, which is today being imploded with imported aluminium – both scrap aluminium and primary aluminium. Also, most countries in the world have a uniform import duty structure for scrap and primary aluminium, and India stands out as an exception, making it an anomaly, and an easy dumping ground for scrap aluminium.

    Second is the elimination of cess on coal to support highly power intensive industries like Aluminium. There is a GST Compensation cess of Rs. 400 per metric ton which is a bone of contention and makes cost of producing aluminium higher than the world average.

    Third is the reduction in custom duty on critical raw materials for aluminium industry value chain such as Calcined and Raw Petroleum Coke, Caustic Soda and Alumina. These high input costs make Indian aluminium more expensive and uncompetitive in the global markets as compared to aluminium being produced by other countries thereby adversely impacting the metal’s export potential. This also encourages local manufacturers of aluminium goods to seek out import channels to mee their requirements, thereby making it a lose-lose for the country and the industry.

    These demands from the industry assume special importance at the juncture when India has an opportunity to become more competitive at a global level and attract greater investments in its manufacturing sector.