Budget 2020: Aluminium industry seeks lower import duty on raw materials

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Aluminium industry has urged the Centre to cut basic custom duty on critical raw materials in the upcoming Union budget, saying high duties will be detrimental for local manufacturers.

In its suggestions for the Union Budget for 2020-21, the aluminium industry has said that the basic customs duty on raw materials like caustic soda lye should be slashed to 2.5 per cent from existing 7.5 per cent, the Aluminium Association of India (AAI) said in a statement.

It said the inverted duty structure on raw materials is a huge disadvantage for domestic aluminium producers dependent on imported raw materials.

"It results in Indian finished goods being costlier and uncompetitive, rendering negative protection against cheaper imports of finished products. It also discourages domestic value addition within the country," it said.

To improve the cost structure and enhance competitiveness of aluminium industry, the AAI said it has requested the government for correction of inverted duty structure.

Describing caustic soda lye as a major raw material for alumina production which is further used for producing aluminium metal, the association said it contributes to over 20 per cent of alumina production cost.

India is a net importer of caustic soda and over 60 per cent imports goes to aluminium industry. Stating that aluminium industry is a bulk consumer of Caustic Soda and highly dependent on imports, it said the industry is not able to meet its demand through domestic sources due to several constraints related to quantity, infrastructure and logistics.

While majority of Caustic Soda production is in western India (Gujarat, Maharashtra, Rajasthan), major alumina producers are in eastern region (Odisha, Chhattisgarh, Andhra Pradesh, Uttar Pradesh), resulting in high logistics costs, it said.

The association further pointed out that imports are already restricted and multiple tariff and non-tariff barriers exist, and said anti-dumping duty is also in place on caustic soda imports from countries like China and Korea.

Therefore, the inverted duty of caustic soda lye be rationalized and reduced from 7.5 per cent to 2.5 per cent, it said.

AAI said Indian aluminium industry is under immense threat and struggling to retain global competitiveness due to recent global developments, rising imports, declining domestic market share, increasing production and logistics costs.

In view of these, any further restriction on caustic soda will be highly detrimental for the sustainability of domestic aluminium industry, the AAI added.

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