Metal cos fear other nations will gain at their cost once India enters RCEP

As a fallout of unequal trade concessions, copper imports have already grabbed a third of domestic consumption, while aluminium imports account for 60%

India's willingness to participate in the Regional Comprehensive Economic Partnership (RCEP) has rankled the domestic metal sector producers. They feel that RCEP will swell imports further into India and enrich the partner nations at the expense of the local manufacturers.

Indian metal producers especially those in copper and aluminium are already besieged by a swarm of imports, strikingly from countries in South East Asia. These countries profit unduly from trade pacts like Free Trade Agreements (FTAs), leaving the domestic makers in the lurch. As a fallout of unequal trade concessions, copper imports now have grabbed a third of domestic consumption, while the share of aluminium imports is a staggering at 60 per cent.

“If RCEP is signed, it is going to be suicidal for the domestic copper industry. ASEAN (Association of South East Asian Nations) has proven to be bad for India. The trade deficit has widened. If left unchecked, the share of copper producers is projected to go down to 50 per cent in the next two to three years,” said Sanjay Karn, general secretary, Indian Primary Copper Producers Association (IPCPA).

RCEP is an economic bloc of 16 nations, China included. India’s trade with RCEP countries is pegged at $100 billion, of which bilateral trade with China alone is valued at $50 billion, while ASEAN countries having FTAs with India boast of trade valued at $13 billion.

The country has a nameplate capacity of one million tonne (mt) in copper production. The output is tipped to more than double to 2.4 mt in five years with domestic companies pledging Rs 14,000 crore in investments. But these investments will be in jeopardy if the country joins the RCEP bloc in a hurry, without protecting the interests of the companies.

IPCPA, which had made a slew of demands to the Ministry of Commerce, was distraught when the Budget for 2019-20 was mute on recasting duties. Before the country commits to joining RCEP, the association has revisited some of its older demands.

“We have asked for zero duty on raw material imports since 95 per cent of copper concentrates is imported. Besides this, we have demand copper cathodes and rods to be exempted from RCEP's purview. Also, we have suggested changes in Rules of Origin (RoO) criteria,” Karn said.

Domestic metal producers are distressed and this is amply manifested in the IIP (Index of Industrial Production) numbers. A closer scrutiny of IIP shows that 10 out of its 25 sub-sections clocked negative growth during April-July of this fiscal. Most of the negative growth has been in metal consuming sectors such as fabricated metal products (-9.8 per cent), motor vehicles, trailers and semi-trailers (-9.7 per cent), electrical equipment (-3 per cent), machinery and equipment (-3.4 per cent) and other transport equipment (-2.6 per cent). Even the manufacture of paper and paper products, rubber and plastics products and textile also saw de-growth in production (-14.8 per cent), (-3.2 per cent) and (-0.8 per cent).

One of the key reasons for the underwhelming performance of manufacturing is the unabated growth in imports. Data from the Ministry of Commerce reveals that the country's imports in FY19 rose 10.2 per cent to $513 billion.

And industry source said China will become a major threat to India once the RCEP is signed, as the trade deficit in goods with that country is as high as $53.5 billion in FY18-19, or almost 30 per cent of India’s total trade deficit.

“India’s manufacturing sector is already struggling with a huge amount of imports, from toys to machinery, coming from China. If India signs the RCEP treaty, import duty of 80 per cent to 90 per cent of goods items of India will become zero which will be a massive blow to the Indian manufacturing industry,” the source said source.