Aluminium Industry
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Budget Measures
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The surcharge on import duties has been reduced.
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Reduction of surcharge on corporate tax.
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Budget Impact
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With the surcharge having been reduced, the import of aluminium will become relatively cheaper. However the impact on domestic aluminium prices will not be significant. This is so because domestic aluminium trades at a discount to international prices. Nevertheless, the margin of protection for domestic companies will reduce.
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The beneficiaries of this removal of surcharge will be companies like Indian Aluminium which are large importers of alumina.
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The reduction in the surcharge on corporate tax will benefit companies as it would have the effect of reducing their tax outgo.
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Industry wish list
R K Kasliwal, Executive President (Finance and Commerce), Hindalco
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Given the fact that the Indian aluminium industry is ensuring adequate supply and providing for the future too, there is no need to encourage imports. Moreover, Indian companies, unlike their international peers, also face higher costs, as they need to set up their own power plants. Basic duty on unwrought aluminium should be maintained at current levels of 25% advalorem. Also, basic duty of customs on aluminium scrap should be increased to 25% advalorem.
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Remove anomaly in excise law as a result of which CENVAT credit on capital goods and inputs is denied to captive power plants.
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Provide concessional rates of CENVAT on selected aluminium products including pressure cookers and vehicles.
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Basic duty of customs on aluminium foils should be increased from the present 25% advalorem to 35% advalorem.
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Key Positives |
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The potential of the aluminium sector can be highlighted by stating just one statistic. The per capita consumption of aluminium in India is 0.5 kilograms as compared to the world average of over 16 kilograms. With this metal percolating the auto and packaging sectors, demand growth should continue to strengthen in coming years.
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Indian aluminium companies continue to be one of the lowest cost producers of metal in the world. As a result of this, despite the fact that domestic aluminium prices continue to remain well below international prices, Indian companies (Hindalco and Nalco) are very profitable. This gives them adequate protection from imports.
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Consolidation in the aluminium sector is anticipated to further benefit companies in terms of the pricing environment. Indian Aluminium was taken over by Hindalco and now the government has resolved to sell its stake in Bharat Aluminium. These developments augur well for the sector.
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Key Negatives |
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Infrastructure spending (total spending estimated at US$ 200 bn over the next five years) continues to grow at a pace much below expected levels. The continued sluggishness belies hope of a sharp growth in demand from the infrastructure sectors.
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A third of all aluminium consumed in the country can be attributed to the electrical sector. But given the financial turmoil that most State Electricity Boards (SEBs) find themselves in, growth in this segment is anticipated to remain sluggish. Another problem emanating from this is that power supplied by the SEBs continues to remain both costly and unreliable. This has significant connotations for the aluminium sector, which is a large consumer of power.
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How was this sector impacted by Budget 2001?
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