India’s demand for copper and aluminium are likely to fall by around 20% during the financial year ending march 31, 2021, but are expected to rebound to around last year’s level in the third and fourth quarter, Satish Pai, managing director of Hindalco Industries Ltd said on Thursday.
He was speaking at a webinar organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) on the outlook for base metals in the country.
“Most of the non-ferrous industry is getting back on its feet and it is very important that demand stimulation takes place.”
India imposed a nationwide lockdown in late March to check the pandemic, which destroyed domestic demand for metals. However, after a steep fall in the first quarter, demand in the second quarter was estimated to be at around 80% of normal levels, Pai said.
He praised the government’s vision for a self-reliant nation (Atma Nirbhar Bharat) and said that policy distortions need to be corrected.
He highlighted that an inverted duty structure in the sector — whereby levies on imports of raw materials are higher than finished metals — has fuelled dependence for metals like aluminium from overseas despite having sufficient capacity at home.
Nearly half of the country’s aluminium requirement is met from imports. On the other hand, India exports around half of its domestic aluminium production.
Industry executives also urged the government to plug free trade agreements with ASEAN (Association of SouthEast Asian Nations) that encouraged more imports of metals because they are duty-free. They also highlighted that taxes on metals were as high as 60% on Indian producers — among the highest in the world.
Dr Ajit Ranade, president and chief executive at Aditya Birla group, said that India was endowed with many advantages in mineral resources, having abundant quantities of most minerals except for copper ore and rare earth minerals.
India has some of the world’s finest quality bauxite which are needed for making aluminium.
“The share of metals and minerals to India’s GDP can easily increase to 5% from 2.5%. With some of the recent policies going in the right direction, hopefully that should lead to substantially higher contribution to GDP,” he said.
“We should at least be able to cater to domestic demand and also cater to global demand,” Ranade said.He said that the tax structure on the industry should be 40% to make the industry more globally competitive.
Dr V.K. Saraswat, member of the Niti Aayog, reiterated that there is a need to correct the inverted duty structure on imports of minerals and metals to support the industry’s growth.
He also said that the nation needs to establish a strong policy for recycling of metals which would help to reduce imports. “Under the new mining policy, we should privatise as much as possible. I think we should also go in for as much Foreign Direct Investment (FDI) in the sector as possible,” he added.