Indian Government: Aluminium Tariffs Will Not Solve Sector’s Problems

Indian Government: Aluminium Tariffs Will Not Solve Sector’s Problems
India's parliament building. Source: Wikimedia

India’s Economic Survey 2015-16, released on Friday of last week, indicated that aluminium production costs rose even though global costs remained static. The Survey went on to say that raising tariffs to quell imports of cheap aluminium would do harm to downstream sectors like power, transport and construction.

According to the survey, India’s aluminium industry would continue to experience tough economic times unless the global aluminium price increases because, at least in the short run, it is “virtually impossible” to reduce production costs.

The survey went on to say that the domestic aluminium industry’s capacity utilization has fallen precipitously over the last eighteen months, matching the global aluminium price decline. As it stands now, India’s cost of production for aluminium is higher than the current global price for the metal. Experts chalk this drop in aluminium’s price to market saturation by the People’s Republic of China, which is matched by the ex-China capacity falling.

India’s capacity rose over the past eighteen months. However, according to the report, India’s utilization, which doubled in 2013-2014 has halved since then.

“Imposition of additional duties to reduce import of aluminium may erode the competitiveness of downstream sectors like power, transport and construction,” the Survey said.

“During this period in India, imports as a proportion of total demand (sales plus imports) have increased substantially from 39.8% in 2011-12 to 56.5% in 2015-16,” the Survey added.

India is the world’s second largest aluminium supplier, behind China. The country produced 3.96 million metric tons in 2014-2015, also second to China’s output over the same period of 21.48 million metric tons. India was the world’s third largest consumer of aluminium over the same time period, using 3.8 million metric tons. The United States used 5.5 million metric tons and China used 22.09 metric tons of aluminium over the same time period, according to the survey.