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EEPC urges Government to continue MEIS Scheme for Covid hit Aluminium Industry without any ceiling / limit on claims

EEPC urges Government to continue MEIS Scheme for Covid hit Aluminium Industry without any ceiling / limit on claims

New Delhi, 3rd September 2020:

Aluminium is metal of strategic importance and an essential commodity for various core industries contributing more than $ 5 Bn in exports forex to the economy.

In a letter sent yesterday, Engineering Export Promotion Council (EEPC) of India urged the Commerce Minister to continue with the MEIS Scheme without any ceiling/ limit for Aluminium exports to survive the current crisis situation.

This letter was sent in wake of DGFT Notification, dated 01st Sept, 2020 imposing a limit of Rs 2 Crore per IEC on total reward claims under MEIS for exports between Sept-Dec, 2020, which is also envisaging further downward revision to ensure the total claims are within prescribed allocation of Rs 5000 Crore, which is a significant cut in the funds outlay for MEIS (Merchandise Exports from India Scheme) from Rs 45,000 Crore in FY-20.

This move is a huge setback for Indian Aluminium exports, struggling to remain globally competitive due high incidence of unrebated taxes and duties and various global developments including depressed demand and crashed LME Aluminium prices by ~30% in last two years. The MEIS scheme has been there much before the pandemic and taking it away at this crucial time when the exports are keeping the economy afloat would be a big blow to the GDP which has already seen a drop of 24 % in Q1 FY21 on Y-o-Y basis.

This has created an extremely precarious situation for Indian Aluminium exports which declined by 11% from $5.7 billion in FY-19 to $5 billion in FY-20, and further will render exports vulnerable and uncompetitive vis-à-vis global players in international markets.

EEPC also demanded expeditious implementation of Remission of Duties or Taxes on Export Products (RoDTEP) scheme on priority for aluminium industry to make India’s aluminium exports competitive and create a level playing field for Indian exporters vis-à-vis global players in international markets.

Being a continuous process industry, all the Indian Aluminium smelters are operating in the country at around 90% capacity. The slump in domestic demand is hurting the domestic Aluminium industry and it will take substantial time for the domestic demand to pick up. The only option left for the industry to sustain is to export the Aluminium products to survive the current situation due to COVID-10 pandemic, but the prices are expected to continue to be weak due to demand slump globally.

Aluminium exports from India are struggling to remain globally competitive due high incidence of unrebated Central & State taxes and duties, constituting ~15% of Aluminium production cost which is amongst the highest in the world. This is adversely impacting the sustainability & competitiveness of the Aluminium industry. This is in sharp contrast to global aluminium industry which is heavily supported by major aluminium producing countries specially China, by way of various incentives/subsidies for raw materials, tax benefits & export tax incentives, low interest rate loans etc. to enhance the cost-competitiveness.

Aluminium exports are currently eligible for a 2% MEIS reward rate which itself does not provide ample cushion to remain competitive against current bearish market condition which is likely to last long. The RoDTEP Scheme (Remission of Duties or Taxes on Export Products) for exports is yet to be formulated and implemented by the Government, which was announced in September 2019 by Hon’ble Finance Minister and approved by the Cabinet in March 2020. While the domestic industry is trying best to remain competitive, the Government support is extremely crucial at this juncture to boost exports and survive this challenging phase.

Government has identified aluminium amongst 12 Champion Sectors, where India can be a global leader and major supplier. The industry has massive potential to double the exports to the tune of $10 billion forex earning in the near future. Aluminium exports which contributed $ 5.7 billion to India’s forex earning in FY-19, i.e. 1.7% of total Indian exports ($330 billion).

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