Champion industry, Aluminium, look for 5% RoDTEP rate to boost exports
The Ministry of Finance announced the implementation of RoDTEP Scheme and extending the benefit to all export goods w.e.f. 01.01.2021. This announcement is a huge relief for exporters post withdrawal of the MEIS and will provide much needed impetus to boost Indian exports.
However, the pendency of notifying the sector-wise remission rates under RoDTEP Scheme is creating a precarious situation and uncertainty for Indian exporters due to ambiguity w.r.t. pricing of goods and thereby impacting Indian exports. The recently announced Union Budget 2021-22 has kept a provision of Rs 13,000 Cr for RoDTEP, which has been significantly curtailed from Rs 50,000 Cr allocation for RoDTEP Scheme when first announced by the Finance Minister in Sept 2019.
The situation for exporters further aggravates with the withdrawal of MEIS. and till date the exporters are unable to avail the MEIS benefit for exports already made during FY-20 and FY-21 (Apr-Dec) due to blocking of online MEIS module for applying claims. This has resulted in blockage of significant funds for already stressed non-ferrous metal sector exporters.
In absence of any export incentives/ remission mechanism, the Aluminium exports are struggling to remain globally competitive 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 encourage domestic value addition and export of finished products. Under MEIS, the Aluminium exports were eligible for a 2% reward rate which itself does not provide ample cushion to remain competitive against current bearish market condition. The Government support is extremely crucial at this juncture to reduce burden of taxes/ levies with least 5% remission rate under RoDTEP to boost exports and survive this challenging phase.
While the Production Linked Scheme (PLI) has been extended to 13 Sectors to boost domestic manufacturing, there is currently no support available for Aluminium Sector, despite being identified amongst the 12 Champion Sectors by Ministry of Commerce & Industry, where India can be a global leader and major supplier. Aluminium is a sector of strategic importance for the country and an essential commodity for various other industries / SMEs due to its critical role in diversified applications for in energy security, national defence, infrastructure, electrification, aerospace, automobile, consumer durables, packaging etc.
The Indian exports are struggling to retain competitiveness in international markets. Being a strategic metal, the Government support to enhance competitiveness for aluminum industry by way of various incentives/subsidies for raw materials, tax benefits & export tax incentives, low interest rate loans is prevalent globally, but heavily supported in China and GCC countries. (Ref- Measuring distortions in international markets: the aluminium value chain- OECD Policy Paper No.218). On the other hand, the Indian Aluminium industry is struggling with incidence of huge burden of unrebated Central & State taxes and duties, constituting ~15% of Aluminium production cost which is amongst the highest in the world and adversely impacting its sustainability & cost-competitiveness. NITI Aayog in its report on “Need for an Aluminium Policy in India” also highlighted the strategic importance of Aluminium for the country and the huge burden of various taxes and duties on Aluminium production costs.
The Aluminium industry seeks immediate support for notifying at least 5% remission rate for Aluminum Sector under RoDTEP Scheme to ensure its global competitiveness and realize its immense potential to double exports worth USD 10 billion Forex earnings for the country.