| Budget 2016 wishlist: Metal sector losing sheen |
| With global commodity prices at an all-time low, the Indian metal industry is now feeling the heat. Imports are high, capacity utilisation is low, and production costs are sky-rocketing. All this has the sector hoping the government will come through with relief measures in the upcoming budget. CNBC-TV18's Anshu Sharma and Surabhi Upadhyay detail the sector's Budget wishlist. India may have the world's seventh largest bauxite reserves at its disposal, but that serves no help. Imports from China and the middle-east have surged to 56 percent in the last 5 years, putting domestic metal companies at a big disadvantage, and prompting them to seek protection from the government. The aluminium industry, for instance, is asking that import duties be doubled to 10 percent, making imported aluminum more expensive. In addition, they also argue that exporting nations like China and those in the middle-east are operating above capacity, and receive massive subsidies from their respective governments. While back in India, capacity utilisation stands at around 50 percent, subsidies are low, and there's no relief from expensive raw material. Speaking to CNBC-TV18, Satish Pai, Deputy MD, Hindalco, says: "Expect coal prices to remain at current levels, no hike in freight rate, stimulus to demand will be needed to push aluminum industry growth." However, some of these demands may not really materialize, especially when helping one sector may hurt another. Not just this, Balvender Kumar, Secretary, Ministry of Mines, says: "Any duty change on aluminum will have an impact on power equipments, Will be meeting power Secretary to discuss the impact of duty on aluminum; power sector is dependent on aluminium for equipments." To add to the pain, even the copper industry says it too is fighting a losing battle against cheaper imports, which have surged at an alarming CAGR of 25 percent over the last 5 years. Companies in this space hope the budget will bring some relief on this front. They also hope that the FM will remove the 2.5 percent duty levied on copper concentrate, given that exports have dropped to 2 kilo-tonnes per annum (KTPA) in FY14, from 30 KTPA in FY10. Talking on the issue, JC Laddha, Group EP- Copper, Hindalco, says: "We have requested revenue secretary to reduce duty on copper concentrate to 0 percent, for export incentive to continue which was withdrawn in 2015 and export incentive continuation with a sunset clause." And then there are companies involved in the scrap metal space, which is yet to get industry status. These companies claim that with the future of the metal industry revolving on the recycling of scrap metal, import duty on such items, which ranges from 2 to 5 percent, should be removed. Aruna Sundarajan, Steel Secretarym, adds: "India will have to grow on the back of recycling and reduce its carbon emission and power utilization and the government would like to support this industry fully." The metal industry, most certainly, is as prone to cyclical downturns as any other cyclical industry but players and experts say the current downturn has been particularly harsh. So, unless the government lends a helping hand, growth in the sector may not be forthcoming and that could derail the government's growth targets for the Indian economy as a whole. |
With luv n' luck
Mahesh Kabra
Mahesh Kabra
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