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by Sohrab Darabshaw on SEPTEMBER 21, 2016
So, will aluminum receive a similar tariff shield as steel has enjoyed in India? The shield refers to a minimum import price (MIP) that is generally imposed on cheap commodities entering India, just like cheap steel from China.
In the case of aluminum, too, the main “culprit” seems to be China. Yet, the stance of the Indian government vis-à-vis an MIP is still not clear, as various ministries concerned with the development have given divergent opinions.
China, which supplies the vast majority of the world’s aluminum, continues to export government-subsidized aluminum to India. Aluminum producers point out that even though the domestic steel industry has a number of protections from imports, only about 15% comes from imports. In the case of aluminum? As much as 50% comes from imports into India, yet there’s no MIP. So primary aluminum smelters such as Hindalco are pressing upon the government to bring in an MIP, just as in steel.
Hindalco Lobbies for Tariffs
Speaking at a shareholders’ meeting a few days ago, Hindalco Chairman Kumar Mangalam Birla said the near-term outlook “was challenging” for the commodities’ market, particularly the aluminum sector, given structural oversupply and a depressed pricing scenario.
Overcapacity in China has flooded the Indian market with aluminum, leading to a surge in imports in financial year 2015-16. The sharp increase in imports will continue to impact sales, Birla said.
The government raised the import duty on primary aluminum by 2.5% in May 2016 to 7.5%, but this, according to the the domestic aluminum lobby, is just not enough.
Minister of State with Independent Charge for Power, Coal, New & Renewable Energy and Mines Piyush Goyal has been quoted in the media as saying he was in favor of an MIP. News reports also suggested that India’s Revenue Department in the Ministry of Finance, too, was pro-MIP, after executives from aluminum producers Vedanta, Nalco, Hindalco and Balco met with Finance Minister Arun Jaitley.
But in a new hurdle, India’s Ministry of Commerce and Industry has ruled out imposing MIP on aluminum as it is of the view that the World Trade Organization’s (WTO) non-compliant measure “will tarnish the country’s image globally.”
Criticism of Existing Tariffs
Already, the Indian government was criticized for its protectionist measures for the domestic steel industry, after it had extended MIP on 66 types of steel products ranging from $341-752 per metric ton for two months from August to October 4.
The Ministry of Mines sought an opinion from the Commerce Ministry regarding MIP on aluminum imports, but the latter has said no to such a move.
But, clearly the last word on an aluminum MIP has not been said yet. A public meeting of various sector stakeholders has been scheduled for September 29 by the Director General of Safeguards concerning increased imports of unwrought aluminum into India. A final decision may be taken after the meeting.
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