New Delhi: The mines ministry will recommend a 5% increase in import duty on primary aluminium products to Union finance minister Arun Jaitley in order to help ease the pressure of large scale cheap aluminium imports on domestic producers.

If implemented, the recommendation, which forms part of the mines ministry’s budget wishlist, will soften the blow to domestic producers like National Aluminium Company Ltd, Hindalco Industries Ltd and Vedanta Ltd, from imports that account for more than half of annual domestic consumption of 3.4 million tonnes of aluminium.

“The Aluminium Association of India (an industry group) recommended an increase of 7.5% in basic customs duty (BCD) in the wake of rising imports. We, however, will recommend a 5% increase," said a mines ministry official, who preferred not to be named.

BCD on primary aluminium products such as ingots, billets, wire bars and rods is at 7.5% now, after a 2.5 percentage point increase was announced by Jaitley in the 2016-17 budget in February.

As per industry estimates, aluminium imports accounted for 54% of 1.68 million tonne of consumption in the first half of 2016-17. The share of imports was 51% in the full 2015-16 fiscal.

The industry has also sought protection from imports by way of a minimum import price of $2,066 per tonne. “We are examining this request as well and will take some action as quickly as possible," said the official.

Surplus production capacity in China and muted commodity prices in world markets in the last few years have resulted in a progressive growth in the share of imported aluminium in the country’s consumption.

Domestic producers are also saddled with high interest costs, clean energy cess on coal, a fuel in bauxite processing, and high industrial power tariff, which make them less price competitive against imports.

“The high share of imports in domestic consumption is a major concern for the aluminium industry. Primary aluminium sector needs support by way of a minimum import price. In the case of steel industry, for example, where primary steel imports account for just 10-15% of domestic consumption, there is already a minimum import price to support domestic manufacturers," said Abhijit Pati, chief executive officer, aluminium business at Vedanta Aluminium Ltd.

Domestic producers, however, are hopeful of consumption of aluminium increasing in the next few years from industries like automobiles, housing, packaging and power transmission.

Aluminium demand is expected to remain robust on account of rapid urbanization, power sector reforms and the steps taken by the government to boost the industrial production and infrastructure, Hindalco said in its outlook for the sector in its annual report for 2015-16.

According to an industry executive, who asked not to be named, primary aluminium producers have a combined debt of Rs70,000 crore.

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