Aluminium firms seek tariff, non-tariff support fearing sluggish demand

India's aluminium manufacturers have asked the government to lower tariffs and give them other help, sensing that domestic consumption wil drop as Chinese imports surge during the coronavirus outbreak.

India’s aluminium consumption is tipped to reduce by 1.5-2 million tonnes in FY21 as the pandemic has considerably weakened demand from consuming industries.

“Earlier, the Indian aluminium industry was mulling for capacity expansion to meet the growing aluminium demand. But with Covid-19 outbreak, the market sentiment is quite low and there is need for revival of growth. Depending on depth and duration of the crisis, aluminium prices may still go down but at the present level of spread of contagion, there is market sentiment for future uptick in the prices of aluminium.”, said an industry source.

Sagging international aluminium prices has hurt domestic aluminium manufacturers. Before the onset of Covid-19 pandemic, global economy witnessed sluggishness. Still, aluminium prices on the London Metal Exchange (LME) were ruling firm at $1,750 per tonne. However, in the aftermath of spread of the virulent pandemic, LME aluminium prices have crashed to $1,450 a tonne. At this price point, about 60 per cent of the global aluminium smelters incur cash losses. Moreover, the cost of aluminium production for the Indian primary producers is in the range of $1,700-1,800 per tonne.

“It is quite paradoxical that despite India being a bright spot for consumption of aluminium, investors or industry proponents will not be enthused to invest in Indian aluminium sector as the realisation will be low and expected returns below the threshold level of investment. There is apprehension on part of the Indian aluminium industry in respect of surging Chinese imports and the native industry getting killed”, read a letter by Aluminium Association of India (AAI) to Pralhad Joshi, Union Minister for Coal, Mines and Parliamentary affairs.

AAI had commissioned a study by a team of experts chaired by TK Chand, former chairman and managing director, National Aluminium Company (Nalco) and industry expert. The report recommending a revival plan for the aluminium industry has submitted to the central mines ministry.
“Aluminium industry creates 200,000 livelihoods for every one million tonne of aluminium production creation. The present employment of 800,000 persons in Indian aluminium industry and the prospect of additional 400,000 livelihood creation will be in jeopardy unless industry revives”, said Chand.

Chand has proposed cashless model for sustainability & growth of aluminium MSMEs (micro, small & medium enterprises). In this model, aluminium majors will provide ingots to MSMEs through a contract of at least 10 years with renewal provision and by back the products for marketing under its banner. This will solve the problem of raw material procurement and marketing of products on the part of MSMEs. The model is expected to bring in sustainability and growth of MSMEs.

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