Budget 2022: Aluminum Association Seeks Customs Duty Hike On Scrap To 10%

Aluminum industry has sought customs duty hike on scrap to 10 per cent

New Delhi:

The Aluminium Association of India (AAI) on Tuesday said country’s consumption of scrap is almost fully import-dependent and has sought an increase of customs duty on aluminium scrap to 10 per cent, despite having a significant presence of primary aluminium capacity and potential to generate sufficient domestic scrap.

Currently, custom duty on primary aluminium is 7.5 per cent, downstream aluminium is 7.5-10 per cent and aluminium scrap is only 2.5 per cent.

The demand has come with the union budget for 2022-23 set to be presented next week on February 1, 2022 by finance minister Nirmala Sitharaman.

“This is the reason why despite having significant presence of primary aluminium capacity and potential to generate sufficient domestic scrap, India’s consumption of scrap is 100 per cent import-dependent.┬áThe way forward is to increase customs duty on aluminium scrap from 2.5 per cent to 10 per cent,” the AAI said in a statement.

The basic customs duty on aluminium and aluminium scrap is not in line with other non-ferrous metals like zinc, lead, nickel and tin, which is a huge disadvantage for domestic aluminium producers. The industry expects an increase in tariff rate of basic customs duty or peak custom duty rate from existing 10 per cent to 15 per cent.

The primary aluminium industry is facing a severe threat from the increasing import of aluminium scrap. The share of scrap in total imports increased from 52 per cent in FY16 to 66 per cent in FY21, resulting in a foreign exchange (forex) outgo of $2 billion (Rs 15,000 crore), it said.

As the Indian economy pushes forward to grow at nine per cent and above over the next few years, a key challenge for the country will be to re-balance its energy needs in favour of renewable sources by 2030 to 50 per cent as per the Paris Agreement.

This is here that the aluminium sector will play a greater role than ever before.

Extensive growth in electric vehicles, renewables, modern infrastructure, energy-efficient consumer goods and greater dependence on strategic sectors such as aerospace and defence, will drive aluminium consumption to grow at a compound annual growth rate (CAGR) of 10 per cent or more.

For example, aluminium usage in EV batteries is 40-50 per cent more than a normal internal combustion engine (ICE). Being three times lighter than steel, it aids in fuel efficiency making it an efficient choice for EVs.

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