Downstream aluminium producers, led by Indian Aluminium, have pointed out to the government that while it has adopted a position of helping downstream steel producers, it has gone against the interests of value addition in the aluminium industry.

In the recently announced Union Budget for 1998-99, the import duty on stainless steel scrap has been reduced from 10 per cent to 5 per cent, while the duty on finished cold-rolled steel has been increased, thus protecting value addition within the Indian industry. This follows last year's relief on steel scrap, from 10 per cent to 5 per cent. Thus, both stainless steel and plain steel scrap come cheap to downstream steel producers.

Aluminium manufacturers have pointed out that in their case, an opposite policy has been followed, whereprimary producers have been protected, but those undertaking value addition have been hurt. Downstream producers have pointed out that although aluminium is classified as a non-ferrous metal in line with zinc, copper, lead and brass, aluminium-rolled products have to compete directly with steel and stainless steel products. In several applications - like roofings, painted sheets, sheets for bus bodies and utensils - aluminium-rolled products are in direct competition with steel products, and the duty disparity has rendered aluminium-based products uncompetitive.Downstream aluminium producers have pointed out to the central government that the effective duty structure, after taking into account the special 4 per cent countervailing duty, works out to 31.68 per cent for aluminium waste and scrap, as compared to 15.89 per cent in the case of iron and stainless steel scrap for melting. "This highlights the disparity and uncompetitiveness faced by aluminium, where modern recycling is environment-friendly and usesonly 5 per cent of the energy consumed to produce primary aluminium," said an industry source. The Indian duty structure runs counter to worldwide trends where aluminium recycling is comprehensively encouraged.

Former finance minister P Chidambaram had mortally injured the prospects of value-added products manufacturers by raising the duty on such scrap from 12 per cent to 25 per cent in the Union Budget for 1997-98. AAI is now busy lobbying with the finance ministry to have the duty reduced to around 10 per cent.Downstream producers have said that due to the higher duty on scrap, it has become extremely difficult for aluminium majors to go in for scrap melting to make metal, instead of the traditional power-intensive smelting process. Using baled and briquetted aluminium scrap, the manufacturers can make aluminium using only one-tenth the power needed normally.

Industry sources, representing the downstream sector, said: "Almost 70 per cent of the cost of aluminium downstream products is primary metalcost. Therefore, any increase in the cost of primary metal not only stagnates demand but also affects the viability of the downstream units." As a result, despite declining international prices in recent months, primary producers have managed to hold on to their prices as imports have become even more prohibitive with the rupee depreciating against the dollar.Several of the downstream units in the country, they pointed out, are either operating at a loss or have been forced to close down operations, they pointed out.