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Aluminium metal scrap to be exempt from customs duty.
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Continuation of power sector reforms.
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Excise duty reduced on manufacturing of automobiles of certain specifications.
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Coal regulator to be appointed to oversee allocation of coal blocks.
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Encouragement for usage of green technology.
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Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary.
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While reduction in customs duty on aluminium metal scrap is positive for certain secondary aluminium manufacturers, it is negative for ingot manufacturers like NALCO and HINDALCO.
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Increased investments in T&D will help boost demand for aluminium as the electrical sector is the major consumer of aluminium in the country.
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If the auto players pass on the reduced excise duty benefits, it will help spur auto demand, which in turn would drive demand for aluminium based auto components.
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Promotion of green technology will lead to demand shift towards aluminium owing to its environment friendly qualities like lower weight and better strength.
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The proposed coal regulator will help ease the process of allocating coal blocks, a key feedstock for captive power plants.
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Companies like NALCO and HINDALCO will be positively impacted due to greater demand from sectors like auto and power.
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Customs duty exemption on aluminium metal scrap is likely to make its cost more competitive vis-à-vis the ingots being manufactured by NALCO and HINDALCO.
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FICCI's wishlist | |
Customs duty on feedstock such as coke to be reduced further | |
Captive mining should be given infrastructure status
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Encourage increased demand by way of more investments in road, mining, port, water, oil and gas
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| Budget 2005-06 |
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Budget 2006-07 |
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Budget 2007-08 |
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Reduction in customs duties on non-ferrous metals. This was likely to keep a check on a rise in prices, as landed cost of these would effectively reduce, thus reducing the net difference between landed and domestic costs.
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Customs duty on primary and secondary forms of non-ferrous metals namely aluminium, copper, zinc and tin and other base metals, has been reduced to 7.5% from the earlier 10%.
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Customs duty on primary and secondary forms of aluminium reduced to 5% from the earlier 7.5%.
Dividend distribution tax to be hiked from 12.5% to 15%.
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| [Read more on Budget 2005-06] |
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[Read more on Budget 2006-07] |
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[Read more on Budget 2007-08] |
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| Key Positives |
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| Robust outlook: It has been well documented that developing countries like India with growing infrastructure needs have high dependence on primary metals like aluminium. Thus, if the Indian economy has to grow in the region of 8% to 9% per annual in the foreseeable future, a similar if not more growth in aluminium consumption cannot be denied as it is used extensively in sectors like power, transport and construction. |
| Increased substitution: Thanks to the metal's inherent advantages like better conductivity and higher strength to weight ratio, a lot of aluminium has started replacing other commodities like steel and plastics in applications ranging from packaging to transportation. This is likely to provide further boost to the growth in aluminium consumption in the coming years. |
| Availability of high-grade bauxite mines: India's total recoverable bauxite ore reserves are estimated to be in the region of 2.5 bn tonnes out which nearly 80% are high-grade reserves that require less energy for conversion into alumina. This makes the aluminium manufacturing process cost competitive and also ensures raw material availability for many years into the future. |
| Cost competitive: The potent combination of availability of high grade reserves and low labour cost makes Indian companies among the lowest cost producers of the metal globally, thus enabling them to weather the industry downturn better than most of their international peers. |
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| Key Negatives |
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| A costly metal: Due to its cost disadvantage, in certain low value applications, plastic, steel and copper can substitute aluminium. This problem becomes all the more acute in a low per capita income country like India where despite the latter's inherent advantages, people, for lack of financial resources might be forced to use cheaper alternatives. |
| High dependence on power sector: Despite improvements in technology, manufacture of aluminium still consumes a lot of power and the supply is also required to be uninterrupted. Although most of the Indian companies have captive power plants, the installation of the same pushes up capital costs, which might eventually lead to higher debt burden. |
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