Around 3,500 recycling units face closure threat due to proposed duty hike

Govt mulls raising import duty on metallic scrap to 10% from 2.5% at present

Around 3,500 recycling units face the threat of closure due to government’s proposed move to quadruple import duty on non-ferrous metallic scrap to restrict its import into India.

Employing around one million skilled and unskilled workers, directly and indirectly, these units are largely driven by unorganised sector players. Processing around 2.5 million tonnes of non-ferrous metallic scrap annually, these units produce key metal components, foundry and forging products for use in a number of industrial and household applications. Termed as secondary metal, the auto sector is the major user of products manufactured from metallic scrap. 

These units have gradually overcome the transitional phase of shifting from non-tax units to the goods and services tax (GST) regime with the required system in place. But now, the government’s proposed move to raise import duty on non-ferrous metallic scrap to 10 per cent from the existing 2.5 per cent is set to ruin the entire industry, which not only saves energy but also conserves natural resources for future use.

"The government is considering raising import duty to 7.5-10 per cent from the existing 2.5 per cent. In fact, primary metal producers in India do not want secondary metal producers to exist. Hence, they have moved to the government seeking an abnormal rise in import duty on metallic scrap, the only raw material for secondary metal production. The same companies, however, promote recycling overseas. So, they adopt double standard just to finish secondary metal producers in India," said Kishore Rajpurohit, director, Metal Recycling Association of India and managing director, SFC Metallurgical Ltd, an Ahmedabad-based metal recycler.

Recycling of aluminium and copper scrap saves up to 95 per cent of energy and also protects the environment by releasing 90 per cent less obnoxious gases into the atmosphere. Since the raw material -- metallic scrap -- is imported from overseas, promoting recycling would certainly conserve natural resources that have been depleting fast globally. 

"Apart from that, secondary metals are 20-25 per cent cheaper than primary ones. Being cheaper substitute to the primary metals in India, domestic producers don’t want consumers to receive articles made of secondary producers at lower price. Their main aim is to promote use of primary metals for their own benefit as the same will help increase their topline and bottomline. But, it will be done at the cost of thousands of small-scale units and their dependents," said Mohan Agarwal, managing director, Century Metal Recycling, Asia’s largest recycler of aluminum, copper and zinc scrap.

The metal industry in India is facing huge import of direct use material, including copper tubes for various applications from countries like Malaysia, Vietnam and Thailand under the free trade agreement.  

The metal recycling industry is growing rapidly in India following growth in the auto sector, which consumes nearly 70 per cent of secondary aluminium produced through metallic scrap.

"The secondary metal cannot be replaced with primary metals in auto sector. Secondly, primary metal producers sell their produce at the landed cost of imported material at Indian port which is determined based on the London Metal Exchange (LME) prices. Hence, raising import duty will not benefit Indian industry at all. Rather, the government must promote scrap recycling industry to conserve electricity for its use in agricultural crop irrigation. This will also help promote ‘Make in India’ as envisaged by the current government at the Centre," said Rajpurohit.

Meanwhile, primary metal producers have urged the government to reduce import duty on copper concentrate to "nil" from the existing 5 per cent. Secondary metal contributes nearly half of India’s non-ferrous metal consumption.

India’s aluminium scrap import jumped 21.44 per cent to 657,000 tonnes during the first half of the current financial year. The import of aluminium scrap had stood at 541,000 tonnes during April-September period of the financial year 2017-18.