Aluminium Industry reiterates urgency for 5 pc RoDTEP rate for economic sustainability

In a letter to senior officials of ministries of Commerce & Industry and Finance & Corporate Affairs, AAI expressed the urgent need for at least 5% remission rate for the Aluminum Sector under RoDTEP Scheme to ensure its global competitiveness. The AAI also requested a separate budget allocation for the aluminium industry, being a strategic sector, to realize the immense potential to double Aluminium exports over the next 2-3 years.

Highlighting the urgency of the matter, the AAI said, the Government needs to notify the actual remission rates as per actual sectoral data submitted to the RoDTEP Committee. The inordinate delay in notifying the sector-wise remission rates is creating a precarious situation and a high level of uncertainty for the Indian exporters. It is adversely impacting exports due to ambiguity w.r.t. pricing of exports goods and absence of any clarity on the mechanism of duty remission/ drawback rates for exports. The situation for exporters further aggravates with the withdrawal of MEIS, as to date the exporters are unable to avail the MEIS benefit for exports already made during FY- 20 and FY- 21 (Apr-Dec) due to the blocking of the online MEIS module for applying claims.

The Commerce Ministry / DGFT are yet to notify the rates due to Government's current situation pertaining to budgetary constraints. Union Budget 2021-22 has allocated only Rs 13,000 Cr for RoDTEP Scheme against Rs 50,000 Cr announced by Hon'ble Finance Minister in Sept, 2019. This allocation is just one-third of the Rs 39,097Cr allocated in FY-20 for MEIS (Merchandise Exports from India Scheme).

Supporting the rates calculated by RoDTEP by an extensive exercise conducted through detailed discussions, due diligence and analysis done for various sectors, AAI said that implementation of its rates will give flexibility in increasing the rate in the future based on budget allocation to increase exports without any objection from WTO.

Throwing light upon the current dilemma of the Indian Aluminium industry, it further highlights the plight of the Indian Aluminium exports struggling to retain competitiveness in international markets as compared to the major exporting countries, specially China, which extends various support measures for export competitiveness. In India, the high incidence of numerous unrebated Central & State taxes/ duties impedes the growth potential of Aluminium sector in India. The various taxes constitute ~15% of Aluminium production cost which is amongst highest in the world. This adversely impacts the sustainability & competitiveness of Aluminium industry and further renders Indian exporters vulnerable and uncompetitive vis-à-vis global players in international markets. These duties and taxes should not be exported as such and should be remitted back to the domestic producers to encourage domestic value addition and export of finished products.

Under MEIS, the Aluminium exports were eligible for a 2% reward rate which itself didn't provide ample cushion to remain competitive against the current bearish market condition. Government support is extremely crucial at this juncture to reduce the burden of high taxes/ levies with an adequate remission rate of at least 5% under RoDTEP to boost exports and survive this challenging phase.

Recognized as one of the 12 champion sectors, India has the 2nd largest Aluminium production capacity (4.1 million tons/ annum) and is the 3rd largest Aluminium producer. Huge investments of Rs 1.2 Lakh crore ($20 billion) have been made to enhance domestic production capacity to cater to domestic demand as well as enhance exports of high quality finished Aluminium products. The industry has generated more than 8 lakh jobs and developed over 4000 SMEs in the downstream sector. Aluminium exports alone contributed $5 billion to India's Forex earning in FY-21, i.e. ~2% of India's export basket and have massive potential to double the exports to the tune of $10 billion Forex earning in future.