India: Cut in metals customs duty Benefits may bypass end users

While domestic producers of zinc, copper, aluminium, have announced a reduction in their sales price following the reduction in customs duty, the consuming industries appear to be in no mood to pass on the fiscal benefit to end users

Industrial users of base metals welcomed the Union Government move to slash customs duty. However, they said the benefit accrued from such reduction will only help them to reduce the cost of production

This means that consumer goods that have metals and stainless steel as major raw materials may not become any cheaper

The Union Government reduced the rate of customs duty from 7.5 per cent to 5 per cent on primary and semi-finished forms of copper, aluminium, zinc, tin and other metals

Post the duty cut, Hindustan Zinc Ltd, the country's largest producer of zinc, reduced zinc prices by Rs 4,500 a tonne, while Binani Zinc Ltd reduced it by Rs 5,000 toRs 2,18,000, according to company officials

Hindalco Industries Ltd reduced price of aluminium ingot by Rs 3,400 a tonne to Rs 1,35,400

Sterlite Industries Ltd, a copper major, confirmed reduction in their sales price

Users of these metals such as zinc and aluminium for galvanisation of steel claimed that they had to bear the burden of high metal prices early to mid last year. Metal prices had reached multi-year highs in the international markets last year

"This decision is welcome even now when prices of base metals have declined internationally," said Mr Saurabh Mittal, Deputy General Manager, Finance, Bhushan Steel and Strips Ltd, users of zinc and aluminium

"If at all there is a reduction in prices of our products, it may be small," said Mr Mittal

The reduction in customs duty would lead to lower production cost, said Mr Seshagiri Rao, Director, Finance, JSW Steel Ltd

With this reduction, the duty level for metals will probably be the lowest in ASEAN countries and way below the WTO level

"The primary objective seems to be controlling inflation in general and in particular, high costs in the manufacturing as metals are key input in capital goods industry," said Mr Tarun Jain, Director, Vedanta group of companies

However, the domestic metal prices are directly linked to the prices on the London Metals Exchange and based on the landed cost of imports (import parity prices), he said adding that the duty cut would not lead to any additional imports, as domestic prices are import linked.