Domestic aluminium industry, that has been facing tough times on account of cheap imports and softening of prices, is now pushing for reducing the duty on raw materials in a bid to cut production costs.
The industry says India has an inverted duty structure with 5 per cent import duty on alumina as well as CT pitch and 7.5 per cent on aluminium pitch and caustic soda -- all raw material -- which together lead to high production costs at a time prices are driving further south.
However, aluminium metal has a 5 per cent import duty.
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"If the duties on raw materials are reduced by even 2.5 per cent the government's exchequer will earn USD 166 million or close to Rs 1,100 crore annually as domestic firms will be able to sell more products," a senior official from industry body Aluminium Association of India said.
It takes around USD 1,500-1,700 to produce one tonne of aluminium metal with alumina and power accounting for 40 per cent each of the cost, with raw materials and others contributing to the remaining 20 per cent, he added.
"Just by decreasing import duty on alumina, CT pitch and aluminium fluoride by 2.5 per cent, each can help the primary producers save about USD 20 per tonne, which can go a long way in making the industry competitive," the official said.
Alumina or aluminum oxide, that is produced from bauxite, is the main ingredient for making aluminium metal, while coal tar pitch or CT pitch is a complex chemical with 22 chemical and physical properties which is also used in aluminium production.
China accounts for 50 per cent of the world's aluminium production and is in a position to control its prices, which have been declining globally in the last year and a half.
In the global scenario of low demand and constant production by China, prices may soften even more, impacting the domestic producers further, an official from Vedanta said.
The price of aluminium at London Metal Exchange (LME) has fallen by 37 per cent to USD 1,555 per tonne in November this year from USD 2,477 a tonne in the year-ago period.
It comes in the backdrop of aluminium industry lobbying with the government to hike import duty or impose safeguard duty on aluminium products.
In September, industry leaders met Finance Minister Arun Jaitley and requested him to raise import duty on the metal to check cheap imports from China.
Primary aluminium producers -- Vedanta, Hindalco and Nalco -- have invested around Rs 1.2 lakh crore to increase the production capacity from 2.1 million tonnes per annum (MTPA) to 4.1 MTPA by 2018-19.
According to industry data, total imports to India have grown by more than 159 per cent to 1,563 kilo tonnes (KT) in 2015 as against the import of 881 KT in 2011, mainly from China and Middle-Eastern countries.
This led to imports accounting for 56 per cent of Indian aluminium consumption in 2014-15, while products of Indian producers account for only 44 per cent.
