India Raises Import Duties on Aluminium by 2.5%

India Raises Import Duties on Aluminium by 2.5%
Cabinet Secretariat of India located at South Block of the building. 8 November 2008 Source: Wikimedia

In an effort to save India’s aluminium industry from cheap imports, the government has raised the import duty on aluminium by 2%. Imports, largely from the People’s Republic of China, have taken up half of the domestic market, which is a situation the government seeks to change by raising the tariff on primary aluminium from 5% to 7.5% and aluminium products from 7.5% to 10%.

Shares of Vedanta Ltd. and National Aluminium Company rose after Finance Minister Arun Jaitley made the announcement on Monday.

India’s aluminium industry is in dire straits at present, as capacity is being eliminated along with employment opportunities. Industry magnates called on the finance minister to intervene by at least doubling the current import duty to 10%.

Different arms of India’s government had differing recommendations as to the question of increasing import duties. A parliamentary committee recommended increasing tariffs last week in an effort to protect Nalco and spur on the increase of smelting capacity. On the other hand, the government’s Economic Survey, which was released last Friday, indicated that increased tariffs would harm downstream sectors like power, transport and construction.

“This is something good but not significant enough for the industry,” said Abhijit Pati, chief executive officer of Vedanta Ltd.’s aluminum operations, to Bloomberg News. “We are still working on a safeguard tax and other measures.”

“It is mixed bag for metal and mining companies in the budget. Higher import duty would help to some extent in curbing rising imports but increase has fallen short of industry expectaion of 10 per cent,” Vedanta Aluminium’s chief executive officer Abhijit Pati told Financial Chronicle.

The budget also halved the export duty on bauxite, dropping it from 30% to 15%.

The budget was a boon to other metals suppliers as well, exempting certain types of iron ore from export duties, and eliminating the export duty on chromium.