Govt rules out minimum import price on aluminium

India’s ministry of commerce and Industry has ruled out imposing minimum import price (MIP) on aluminium and is of the view that the World Trade Organization’s (WTO) non-compliant measure will tarnish the country’s image globally.

This comes in the backdrop of the National Democratic Alliance government courting criticism over its protectionist measures for the domestic steel industry. On 4 August, the government extended MIP on 66 types of steel products ranging from $341-752 per tonne for two months till 4 October.

“The ministry of mines had earlier this month sought an opinion from the commerce ministry regarding MIP on aluminium imports, but the latter has clearly said no to such a move as it is WTO non-compliant and its imposition will tarnish the country’s image,” said a senior government official requesting anonymity.

The mines ministry had sought the commerce ministry’s opinion given domestic aluminium manufacturers including Vedanta Ltd, Bharat Aluminium Co. Ltd and Hindalco Industries Ltd lobbying for introduction of MIP on aluminium.

Earlier, these companies had also sought safeguard duty on aluminium imports but the plea was deferred, as reported by InfraCircle on 24 May.

Safeguard duty, a WTO-complaint measure, is brought in for a certain time period by the government to help protect domestic industry from cheap imports. Importing countries also have other options, such as introducing anti-dumping duty, to make domestic prices at par.

Newswire Press Trust of India on 14 September reported the Directorate General of Safeguards (DGS), a finance ministry arm, will hold a public hearing on 29 September to finally decide if safeguard duty on import of unwrought aluminium should be imposed.

Unwrought aluminium is extracted from primary metal or scrap. India imports it from various countries such as the United Arab Emirates, Malaysia, Russia, South Africa, Oman, Qatar, Bahrain and Thailand.

DGS had imposed 5% provisional safeguard duty on imports of unwrought aluminium on 21 April. However, the Board of Safeguards, chaired by the commerce secretary, in a 29 April meeting decided against it.

“The ministry of mines also concurs with the fact and favours completion of pending investigations of safeguard duty and anti-dumping investigations on unwrought aluminium,” said the official quoted above.

On 21 April, DGS in its preliminary investigation found that aluminium imports have caused financial losses to the domestic industry and had recommended a provisional safeguard duty of 5% on unwrought aluminium imports for a period of 200 days. However, the Board of Safeguards deferred it, as reported by InfraCircle on 3 May.

“No application has been moved by the companies related to MIP before the mines ministry,” another government official, who also did not want to be named, said.

The official added that the case may be taken, if received, after due consultations with the downstream industry comprising of manufacturers of utensils, wire and related businesses.

The official further added that the aluminium downstream industry is meeting mines minister Piyush Goyal on Monday.

Queries emailed to the spokespersons of the ministry of mines, commerce, Vedanta, Bharat Aluminium Co. and Hindalco Industries and National Aluminium on 16 September remained unanswered.

Analysts, however, believe aluminium companies have seen a decline in margins during the first quarter this year compared with last year. 

“It can be seen that companies’ profitability has declined. Also, there was an element of inventory losses in Ebitda (earnings before interest, tax, depreciation and amortization) of these companies,” said Mahavir Jain, associate director at India Ratings and Research Pvt. Ltd.

He added that physical premiums have also contracted to $200 from $400-500.

For financial year 2015-16, Hindalco reported a profit of Rs.607 crore. While Vedanta clocked a profit of Rs.5,471 crore and National Aluminium Co. Ltd’s profit was Rs.731 crore.

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