Last week the Aluminium Association of India (AAI) said that to apply for tax incentives by the exporters under the Export Incentives Scheme MEIS had created an extremely precarious situation for the Aluminium export by blocking the online system. The industry body said that this move will further render exports vulnerable and uncompetitive.
From July 23 under the MEIS (Merchandise Export from India Scheme) the online system for exporters apply for availing tax incentives has been blocked by the commerce ministry. This is because of the decision of the Department of Revenue to limit the benefits under the plan at Rs 9000 crore for April to December 2020. Through the Directorate General of Foreign Trade (DGFT) MEIS portal, the Centre was urged by the AAI to continue with the processing of an application.
From accepting new applications to limit the insurance for any more scripts from July 23 the Directorate General of Foreign Trade has also blocked the MEIS module. AAI said in a statement that, for the Indian Aluminium export which has declined by 11 percent from USD 5.7 billion in FY-19 to USD 5 billion in FY-20 and further will render export vulnerable and uncompetitive vis-a-vis global players in the international markets, this has created an extremely precarious situation. The Aluminium body has also demanded the inclusion of Aluminium in the product linked incentive scheme implementation of Remission of the Duties or Taxes on export products (RoDTEP) scheme for the Aluminium industry to create a level playing field with the global players.
As the Indian Aluminium is a continuous process industry all the Indian Aluminium smelters are operating at around 90 percent capacity, as the slump in domestic demand is hurting the Aluminium industry and it will take substantial time for the domestic demand topic up. To export the Aluminium product to survive is the only option left for the industry due to the current situation as the COVID-19 pandemic is widespread, but the prices are expected to be week due to a demand slump globally.
Due to the high incidence of unrelated central and state taxes and duties constituting 15 percent of Aluminium production cost which is among the highest in the world, the Aluminium exports from India are struggling to remain globally competitive. But the Aluminium exports are currently eligible for a 2 percent MEIS award rate which itself does not provide ample support to remain competitive against the current market condition. Now the government identified Aluminium among the 12 sectors where India can be a global leader and major supplier.
