Secondary metals makers seek duty exemption

Producers of secondary metals have urged the government to review the inverse tax structure with import duty of 2.5-5 per cent on scrap and 'nil' on finished products.

India has signed free trade agreements (FTAs) with a number of Asean countries that have benefited at the cost of India, they said.

While Indian processors import metallic scrap at five per cent duty, processors in FTA countries pay 'nil' duty for it.

"Under the Make in India programme, local units need to be protected. Secondary metal sector is important and needs to be protected with a level-playing field. The government needs to review this inverse duty structure with high import tax on raw material and low on finished products," said Sanjay Mehta, president, Metal Recycling Association of India, and director of MTC Group, one of India's largest metal recyclers.
 
Apart from basic import duty, scrap importers also pay a four per cent special additional duty (SAD). Central value added tax credit norms are often not met due to the inability to achieve required value addition of 15-20 per cent. While value addition norm in India is missed by a thin margin, the same is met up to 35 per cent on free on board value in FTA countries including Malaysia and Thailand.

"This has resulted in higher cost of semis and finished products made in India when raw material imported from FTA countries. Most importantly, all metal processing countries including in Asia have exempted scrap import from import duty. Ironically, India still continues with the age-old practice of levying import duty on raw material despite having imports of finished products duty-free. This has made the survival of metal processing units difficult," said Rohit Shah, director of Heena Metal, a city-based scrap importer and metal recycler.

A recent Frost & Sullivan report estimated India's foundry production at 9.5 million tonnes (mt) compared with China's 41 mt. India will become a net importer of castings if import duty on scrap is not removed, the report noted.

Total demand of metallic scrap in India stood at 20.4 mt in 2014 with an estimated compounded annual growth rate of 11.4 per cent. At this rate, the overall demand would be 39 mt by 2020.

Recycling saves energy and natural resources as this process requires used metal as raw material.

"The government should allow import duties and countervailing duties to be collected against accumulated in manufacturers' profit and loss account as unutilised. Also, secondary metals' manufacturers should be allowed to claim SAD in line with traders," said Mehta.

The government is set to come out with a national scrap policy soon.