Faced with the threat of closure, metal scrap traders have appealed the government to reshuffle taxation structure to volume-based from value-based.
In a meeting with the officials of the Ministry of Environment and Forests (MoEF), senior representatives of Bombay Metal Exchange (BME) decided that its members would register themselves with the local state pollution control board and pass on records of all transactions including import of goods to the government in a regular filing.
The development assumes significance as metal scrap traders have been struggling to convince the ministry officials that used metal never affects the environment. However, sub-standard metal scrap which also contains cables, plastic residues, always affects the environment.
Which, if the government uniformly changes the tax structure, a majority of problems related to hazardous metal scrap imports would be resolved, said Rohit Shah, director of the BME.
Since, sub-standard metal scrap is available at cheap prices as compared with real scrap, value of the commodity declines which also reduces taxes despite the quantity of imports remains voluminous.
For example, if a trader imports sub-standard copper scrap including hazardous material which is landed at Bombay port at Rs 100 a kg. The overall 20 per cent duty is levied on it based on the price of the red metal on the London Metal Exchange (LME) with 5 per cent basic import duty, 8 per cent countervailing duty or excise duty and 4 per cent of special additional duty. Now, this duty is somewhat equal to the duty paid on real metal scrap which equals to the lower quantity of shredded scrap.
But, if the duty is levied on tonnage basis, import of environment-unfriendly materials including hazardous plastic materials would be checked, said Shah. MoEF has threatened traders to register themselves with the state pollution control boards immediately as any imports without proper registration and license after January 31, 2010 will be liable for confiscation and penal action under the Customs Act.
The ministry has also insisted traders to avoid import of metal scrap on behalf of another traders and instead, suggested to supply to actual users including foundries.
Around 1,000 units in the small-scale sector are currently involved in producing secondary copper ingots from imported scrap while another 10,000 small, medium and large traders are engaged in trading activities. Scrap copper supply in India is estimated at around 100,000-115,000 tonnes per annum. These include cartridge brass disposed by defense (17 per cent); forgings, fabrication, redrawing and machining (31 per cent); old winding wire scrap (13 per cent); copper cable scrap disposed by users in electricity and telephone (12 per cent); and wire & cable units (9 per cent)
But, scrap use has increased because of high raw copper prices. However, growth in scrap usage and availability is expected to slow down, with the market expected to become more reliant on mine production growth in the last five years. According to Icra report, primary refined copper production has increased at a five-year compounded annual growth rate (CAGR) of 2.9 per cent to 15.5 million tonnes globally in 2008, secondary production (from scrap) increased 8 per cent to 2.7 million tonnes.
Aluminium scrap or ‘secondary aluminium’ is an important source of supply for aluminium alloys. Globally, secondary aluminium production accounted for 19 per cent of total aluminium production in 2007. Secondary aluminium is recovered from both new and old (purchased) scrap.
India’s import of aluminium scrap declined 8 per cent in FY08 to 0.226 million tonnes, as compared with 0.246 million tonnes the previous year.
