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As cheaper imports increases copper industry sends SOS to government |
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NEW DELHI: India's three copper majors — Hindalco Industries, Vedanta Ltd and Hindustan Copper Ltd—have warned the government that the sector is facing an imminent shutdown in the face of a surge in cheaper imports from Japan and Asean countries, which could jeopardise the Narendra Modi-led government's 'Make In India' initiative.
Operating at 75% of capacity, the industry has cautioned about further cuts in production that could impact 10,000 jobs, blaming freetrade agreements or FTAs, which would allow an influx of duty-free copper by 2021, for making the entire sector unviable.
The development assumes significance amid a tepid global commodity market that is seeing demand shrink as China's hunger for resources is slowing down in tandem with its growth. The copper industry's SOS call comes within a month of the Modi government decision to impose a 20% safeguard duty on import of some steel products for 200 days, after a similar clarion call from local steelmakers.
Top executives from the copper industry have stressed on the need to take urgent steps to reverse the trend that has now led to imports capturing a third of the market and proposed a hike in import duties on refined copper products from 5% to 7.5% and doing away with the 2.5% import duty on raw copper concentrate.
"The industry is struggling to maintain its ability to compete with imports, with FTAs bringing the duty on refined copper from Japan and Asean nations down to 2.73%.
These pacts also promise a reduction in custom duty to zero by 2021, so imports will become even cheaper than indigenous copper products," said a government official aware of the development.
India exported copper products, essential for sectors like power and infrastructure, worth Rs 36,000 crore in the past three years, but imports of refined copper have trebled over five years, growing at a compounded annual growth rate of 25%.
The India-Japan comprehensive economic partnership agreement or CEPA has led to copper cathode imports from the partner rising by over 20 times between 2013-14 and 2014-15, according to industry submissions to the government.
The duty differential between domestic and imported copper products has gone down gradually from 20% in 2002-03 to 2.5% since April 2011, severely impacting the feasibility of the original business plans of Indian copper makers when building up these capacities.
"Both primary copper producers and downstream industries, including over 800 small and medium enterprises, are suffering, and production may have to be cut further soon," said an industry representative, adding that the issues have been raised with officials in the mines ministry and would also be taken up with the ministries of finance and commerce.
"The domestic industry looks forward to government's support to maintain its viability and improve its competitiveness and will contribute significantly to the PM's vision of Make in India," the industry executive said.
Between April and June this year, India imported copper wire worthRs 78 crore from Asean countries, almost double the imports recorded in the same quarter last year, he pointed out as an example of the adverse impact of FTAs.
Raw material scarcity has also been identified as a challenge, as India imports almost 100% of its copper concentrate (basic raw material) needs.
"To make copper smelters viable, the industry has proposed bringing the 2.5% duty on such imports to zero, especially since most of the raw copper exporting nations have imposed curbs on exports," said an official in the mines ministry.
Source : economictimes.indiatimes.com
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