Indian foundry units are facing a severe threat of losing USD 1.95 billion of exports business to competing countries like China and Taiwan due to the recent levy of import duty on metal scrap - the only raw material for producing critical equipment for the heavy-engineering sector.
Effective May 8, the government levied 2.5 per cent of import duty on all types of scrap imports, including aluminium, stainless steel, iron and steel. Also, four per cent of special additional duty (SAD) was levied on brass scrap -used for manufacturing brass artifacts, popular in developed countries.
Since, India does not generate adequate metal scrap to meet the annual requirements to produce 10 tonnes of castings, it imports it from other countries.
"The import duty on scraps of iron and steel, stainless steel and aluminium in most other competing countries is also 'nil'. Hence, the levy by the Indian government will make the Indian Industry incompetitive. This will also lead to inverted duty structure, since metal produced from scrap by free trade agreement (FTA) countries is allowed duty-free, whereas imports of scrap by manufacturers are being subject to duty," said A K Anand, Foundry Informatics Centre (FIC), a premier body of 4,500 foundry units in India.
The Indian foundry industry has been facing a severe demand slowdown due to the unfavourable economic situation in the West - the major destination for India's casting exports. On the domestic front also, demand from the consumer industry has been lower since the beginning of the last financial year. Primary metal being costlier by $300-350 a tonne, metal alloys are produced through scrap to make the finished products cost-effective.
"The levy of import duty on scrap is a counter-productive step. It will not only dissuade the usage and trade of scrap but also add immensely to carbon emissions, scrap recycling being 40 per cent less energy-intensive," said Zain Nathani, Vice President of Metal Recycling Association of India (MRAI).
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