Indian refined copper producers and makers of value added products have sought waiver of 2.5% duty on copper concentrates ahead of the Union Budget 2019-20.
The domestic copper industry is under a compulsion to import copper concentrates in large quantities owing to lack of quality copper deposits inside the country.
“The domestic availability is merely 4% of the total requirement. Thus, import of copper concentrate by the industry is inevitable. In the last seven years since FY2011, the market share of copper imports to domestic consumption has expanded from 14% to 37% at the end of FY2018. On the contrary, the domestic producers have seen steady erosion of market share, with their share plummeting by 21 per cent CAGR (compounded annual growth rate) in the comparable period”, said an industry source.
Copper players feel that given the non-availability of copper concentrates domestically, there is no economic rationale to continue with the duty on imports. The abolition of the 2.5 % duty will enable the domestic copper industry to have a level playing field and compete with value added products manufactured by the countries that have inked Free Trade Agreements (FTAs) with India and hence, are pumping more volumes of wire rods and refined products where the domestic industry boasts of self-sufficiency.
Copper producers are flustered by existing duty anomalies which seemingly bolster imports at the expense of local production. Imports of finished goods with countries bound by Free Trade Agreements (FTAs) attract zero duty. Ironically, India’s copper producers have to fork out 2.5 per cent duty on import of copper concentrates, a raw material they are constrained to import due to lack of good quality copper deposits in the country. Domestic availability of the raw material meets only a measly four per cent of the industry’s requirement.
The inverted duty structure explains the immense growth in imports- they have soared 100 per cent CAGR (compounded annual growth rate) from FTA countries in the last six years. Import of refined copper (amply produced in India) is riding high only on account of the duty arbitrage under ASEAN FTA.
The domestic copper industry, comprising the primary and downstream segments, is estimated to be around Rs 60,000 crore per annum, employing over a lakh directly and generating indirect employment many times over.
Copper manufacturing boasts of a nameplate capacity of one million tonnes per annum (mtpa), sufficient to cater to the domestic demand pegged at 0.7 million tonnes. With major players like Adani Group and Vedanta Ltd having firmed up ramp-up plans, the rated capacity is envisaged at 2.4 mtpa by 2025 when domestic consumption is projected to touch 1.5 million tonnes.
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