Domestic aluminium makers want minimum import price (MIP) to protect against surge of cheap imports, but the commerce ministry â€œcautiousâ€ as move may not be strictly WTO-compliant
While country’s top aluminium makers have sought imposition of minimum import price (MIP) on products due to an import surge from China, West Asia, as well as Vietnam, Thailand and Malaysia, the commerce ministry wants to be very “cautious” before levying the non-tariff trade barrier, as it wants to steer clear of flouting WTO norms.
The commerce ministry believes has MIP can be used only as a short-term measure to protect the local industry, a senior government official told Moneycontrol, adding that there would be a stronger case for imposition of MIP if high imports were coupled with falling prices at global benchmark London Metal Exchange (LME).
However, local aluminium prices mirror trends in LME, where currently prices have firmed up, the official said.
MIP serves as the floor rate below which overseas shipments of specified items are not allowed to enter Indian shores.
The development comes at a time when India has already been dragged to WTO after Japan, in December, filed a complaint against the MIP on steel imports.
MIP was imposed on certain steel products, starting February, 2016, for a year, to guard local industry against cheap Chinese imports. The trade barrier has currently been revoked and has been replaced with anti-dumping duty on most of the products that were in the ambit of MIP.
However, in case of aluminium, the industry has not approached the government for an imposition of anti-dumping duty, a measure that would take care of incessant imports for a longer time frame.
The industry has proposed an MIP on primary and secondary aluminium products, for a period of six months.
Experts say resorting to extreme trade measures is not the only solution to cater to the needs of the local manufacturers.
“The government needs to do a serious exercise to find out why local manufacturers are not getting a level playing field and what measures other countries are taking to safeguard their local players,” Biswajit Dhar, professor at Jawaharlal Nehru University said.
Echoing similar views, Professor at Research and Information System Ram Upendra Das said that the Indian industry also must strive to become more productive, more innovative, and efficient, to face global competition, unless there is an unfair trading practice from a partner country.
Top aluminium makers have been pressing the government for immediate measures to arrest the import surge and help local producers realise better prices and margins.
They have complained that a slowdown in global demand and the Chinese dumping metal into the Indian shores have depressed prices, increased competition and hit companies’ profitability as they are finding it difficult to sustain their sales in the local market.
Companies such as Hindalco Industries Ltd, Vedanta Ltd and state-owned National Aluminium Co Ltd have claimed that China is offering huge subsidy in power charges and incentive on export of finished and semi-finished products. In addition, India’s free trade agreement (a pact between countries to reduce or eliminate tariff or non-tariff trade barriers) with Thailand, Vietnam and Malaysia has only aggravated the surge in imports.
Total aluminium imports into the country increased to 909,000 tonne during April-September, 2016-17, up 23 percent during the same period last year.
Hired by the industry, consulting firm Mecon has proposed MIP rate of USD 1,996 per tonne for primary aluminium products, which includes ingots, billets and wire rods.
The consulting firm has also recommended MIP price for secondary aluminium products such as tubes, wires and cables. While an MIP of USD 3,000 per tonne has been proposed for aluminium tubes and pipes, USD 2,2275 per tonne has been recommended for wires.
A floor price of USD 2,566 per tonne has been projected for aluminium sheets, plates and strips.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.