Budget 2023: FICCI backs higher duties on imported aluminium products to boost domestic manufacturing

New Delhi [India], January 19 (ANI): Sharing its pre-budget proposals in the run-up to Budget 2023, the Federation of Indian Chambers of Commerce and Industry (FICCI) on Thursday sought the government’s intervention in encouraging the progress of the Indian aluminium industry.

Among its proposals, it has suggested increasing duty on the import of aluminium and aluminium products to at least 12.5 per cent. The industry body, which represents India’s leading companies across sectors, indicated that this would help curb dumping of aluminium products within the country and encourage growth of the domestic manufacturing and recycling landscape. Aluminium, a resilient metal that retains its fundamental properties even when recycled, is widely utilised and key to the success of several strategic and sunrise industries, ranging from defence to construction to electric vehicles.

However, FICCI pointed out that in recent years, there has been a visible surge in subpar aluminium imports, especially from China which constitutes over 85 per cent of downstream aluminium imports at present.
In addition, India is also witnessing aluminium imports from the US, UK, Malaysia and the Middle East. Several of these countries support their domestic industries with concessions and benefits, such as low-interest loans, cheaper power tariffs, increased raw materials availability, and tax benefits, according to FICCI.

Conversely, the Indian aluminium industry has been struggling with a slump in global demand, rising production and logistic costs, a deluge of imports, and declining market share. FICCI said currently, over 60 per cent of India’s demand for aluminium is being met through imports. To illustrate the concerning situation, since 2010-11 (FY11) the aluminium consumption in India has increased by 77 per cent (from 2,207 thousand tonne (kt) to 3,916 kt), with a rise in aluminium imports by 166 per cent from 878 kt to 2,334 kt, whereas scrap imports have risen by 253 per cent from 470 kt to 1661 kt over the same duration.

FICCI has proposed rationalising the inverted duty structure on several key materials from 7.5 per cent to 2.5 per cent to encourage domestic manufacturing and combat the dumping of imports. The industry body has also recommended the elimination of cess on coal (goods and services tax compensation cess of Rs 400/million tonne) to support highly power-intensive industries like aluminium. The industry body said the cost of producing aluminium in India is also among the highest in the world, largely due to the high taxes and duties on inputs and raw materials, accounting for 18-20 per cent of production costs.

The high import duties on raw materials put domestic aluminium producers at a disadvantage cost-wise, reducing their cost competitiveness in comparison to international producers and affecting their ability to withstand the influx of cheaper imports of finished products, according to FICCI. It also discourages domestic value addition within the country by preventing fresh investment in the sector, despite India having one of the largest bauxite and coal reserves in the world.

The Union Budget 2023 presents an opportunity for the government to help improve the viability of the domestic aluminium sector and provides it level playing field for continued innovation and advancement.