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Indian metal trade seeks tax cuts to up consumption

India's non-ferrous metals industry is hoping for changes in excise and import duties in this month's Union budget to increase domestic consumption and competitiveness, but analysts question whether concessions can be made.

Industry officials said their wish list included a cut in import duties on aluminium and raw material of copper, differential levies on scrap and finished metals, as well as a check on cheap imports from Nepal.

But analysts said they did not expect any concessions for the metals sector in the budget on February 28 because the government had to raise additional resources for reconstruction of quake-hit Gujarat.

"The government can ignore these demands in this budget as these are not big issues," an analyst with a foreign bank said.

S P Shorewala, president of Indian Non-Ferrous Metals Manufacturers' Association (INFMMA), said the government had created a conducive atmosphere for growth in the past few years by rationalising the duty structure.

"But certain measures like further reduction in import duties on raw materials and excise tax on metals are needed to boost the industry," he said.

Duty changes, he said, would increase competitiveness and spur consumption of metals in the country.

Wish list

The association wants the excise duty on aluminium to be cut to eight percent from 16 per cent to promote consumption in sectors like automobiles, construction and consumer products.

It is also looking for a reduction in import duty on aluminium to 20 per cent from 25 per cent and on copper concentrate to three or even 0 per cent from the current level of 5 per cent.

Jayantilal Ranka, president of the Bombay Non-Ferrous Metals and Scrap Merchants Association, said there should be a duty differential of 15 per cent on metals scrap and finished products compared with the current uniform levy of 38.5 per cent.

The Bombay Metal Exchange, a body of traders and manufacturers of non-ferrous metals, is seeking a check on cheap metal imports from Nepal.

India imposes an import duty of 38.5 per cent for non-ferrous metals but no duty on metals coming from Nepal under a trade agreement between the two countries.

Analysts said cheap imports from Nepal were hurting only a small section of metals industry like small and medium units, converting non-ferrous metals into finished products.

Metals industry on growth path

Demand for metals in India is growing at a rate of 8-10 per cent a year and production is also increasing but certain sectors like lead, zinc and copper need special attention because of low production capacity and substantial raw material imports, analysts said.

"The sector is looking up...it is in the midst of expansion. Demand growth is also going up," a metals analyst said but added that import dependence of the country for raw materials of some of the metals was a matter of concern.

India imports almost its entire requirement of copper concentrate. Domestic production of refined copper is 270,000-290,000 tonnes against demand of 300,000-320,000 tonnes per annum.

Annual demand of lead is about 170,000 to 180,000 tonnes but domestic supply from all sources, including recycling, is around 70,000 tonnes.

Zinc demand is estimated at about 270,000 tonnes per annum compared with domestic production capacity of 182,000 tonnes.

The country is almost self sufficient in aluminium as domestic production is nearly 618,000 tonnes a year.

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