Copper producers want waiver of 2.5% import duty on concentrates

Copper producers in the country have called for a waiver of 2.5 per cent duty on imports of copper concentrates to ensure viability in operations. Domestic copper manufacturers lean heavily on concentrates sourced from other countries since India lacks ample and high-quality deposits. Only four per cent of their demand is met through indigenous supplies.

In the aftermath of the shutdown of Vedanta Thootukudi smelter in Tamil Nadu, India turned into a net importer of copper in FY19 after 18 years. The industry believes the inverted duty structure is to be blamed for the uptrend in imports. 

While imports of copper concentrates is taxed at 2.5 per cent, countries that enjoy Free Trade Agreements (FTAs) with India ship value added copper products free from duties. Ahead of the ensuing Budget for 2019-20, the Indian Primary Copper Producers Association (IPCPA) has demanded cut in import duty on copper concentrates from 2.5 per cent to nil and hike in duty on refined copper products from  5 per cent to 7.5 per cent.

The association has also lobbied for more stringent norms to apply to scrap recyclers to conform to the environment pollution norms. Besides, IPCPA has suggested levy of environment cess on imported scrap based on copper content and raising duty on imported scrap from 5 per cent to 7.5 per cent.

Major copper producing countries like China, Japan, Korea, European Union (EU) are already importing copper concentrate at zero duty. 

This has affected level playing field for Indian smelters as the cost structure of smelters in those countries are lower on account of zero import duty on copper concentrate.

“The copper industry is currently passing through a rough patch. Rising cost pressures, continued tariff liberalization under various FTAs, a huge surge in imports and revoking of export incentives have jeopardized the survival of the industry. The copper industry is going through very challenging times due to difficulty in accessing raw material (copper concentrates) at economical rates. Reduction of import duty on concentrate can bring cost competitiveness of domestic smelters to compete against import of finished products coming with zero duty from countries under FTAs and will give a fillip to the domestic copper industry”, said an industry source.

Given the non-availability of copper concentrate in India, the copper manufacturers believe there is no economic rationale to continue with the 2.5 per cent import duty on the raw material. The withdrawal of duty will help Indian producers to compete with value added products sourced from FTA countries at zero import duty.

Domestic copper producers are also vexed over escalating scrap imports. As per study by ICAI (International Copper Association India) in 2016, copper scrap processing by registered recyclers in India accounts for about 57 per cent of the market and balance quantity by unregistered ones. Most of the domestically procured scrap is not in the tax net causing revenue loss to the government. The study says that 23 per cent of copper scraps consumed in India are from import sources and 77 per  cent is of domestic generated scrap. Further, 24 per cent of copper downstream production comes from the secondary market.

To compound the woes of Indian copper smelters, China has clamped restrictions on import and usage of scrap, increasing risks for diverting more shipments to India.