Aluminium industry seeks removal of tax on raw materials

New Delhi: With the demand for aluminium poised to rise exponentially in India from the current 4 million tonne per annum (MTPA) to 10 MTPA by 2030, the Aluminium Association of India (AAI) on Tuesday said an investment of nearly Rs 4 lakh crore would be required to scale up production capacities and adequately cater to the rise in demand.Confronted with challenges stemming from rising foreign imports, a declining market share and escalating costs, aluminium industry representatives have sought government intervention for supportive measures to tide over this challenging phase.

The high cost of procuring raw materials is proving a major hindrance in attracting fresh investments, the aluminium-producing firms said. Several key inputs for the sector, such as calcined pet coke, caustic soda lye and aluminium fluoride attract high duties of 7.5 per cent, which need to be removed completely, or rationalised to at least 2.5 per cent to boost cost competitiveness, according to the industry body.

Citing the increased cost of production due to the rising cost of raw materials, the AAI has also pointed out that currently, nearly 20 per cent of the cost of producing aluminium arises from government taxes alone. "This is stifling the development of the aluminium sector, including the domestic scrap landscape," it said. Further, for the overall development of the domestic recycling landscape, it is crucial to prevent the dumping of low-quality foreign scrap in India.

At present, foreign scrap is not governed by any quality standards, presenting safety and environmental risks. The industry representatives have recommended that the necessary quality standards be imposed, along with a duty of at least 10 per cent from the current 2.5 per cent to act as a deterrent from making India a dumping ground of substandard foreign scrap.

AAI recommended rationalisation of railway freight for the movement of critical raw materials like bauxite, alumina and coal, along with priority in rail allocation to the aluminium industry, considering its must-run status.The industry body also asked the government to consider the elimination of goods and services tax (GST) compensation cess to support power-intensive industries such as aluminium.

It also requested the government to ensure that the domestic market is not flooded by unchecked substandard imports in the form of scrap. Aluminium is a critical pivot around which revolve the fortunes of several critical industries essential to India`s rise, AAI said.The Union Budget 2023 holds special significance as it presents an opportunity for the government to build a conducive environment to enable the continued development of the domestic aluminium industry, the industry body said.

Although the prolonged geopolitical conflict this year has upended hopes for long-term stability, Indian industry has been acknowledged as a bellwether for its economy, representing hope for continued progress amidst the turmoil, the Aluminium Association of India added.