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Run-up to the Budget: Aluminium

State of the industry (2000-01)

• Demand for aluminium is expected to increase due to a stable economic growth, an increase in industrial production, and continued construction activity in the residential segment. However, growth in demand is expected to be lower as compared with that in 1999-2000, due to a significant decline in automobile production.
• Supply is expected to increase due to high operating rates of Nalco and Malco.
• In the first half of 2000-01, domestic prices of aluminium increased due to an increase in international prices. International prices increased due to a decline in supply from North America, where several smelters reduced production as a result of a significant increase in power costs. Domestic prices also increased due to the depreciation of the rupee vis-à-vis the dollar.
• Margins of domestic aluminium producers are expected to remain stable as the increase in the cost of inputs, such as coal and fuel oil, is expected to offset the increase in realisations.

A reduction in the customs duty on primary aluminium and scrap: Semi-fabrications manufacturers have asked for a reduction in the customs duty on primary aluminium and scrap, in order to ensure the profitability of downstream manufacturers. However, primary aluminium producers have asked for the customs duty to remain at 27.5 per cent and 16.5 per cent on aluminium and scrap respectively.

Copper: State of the industry (2000-01)

• Demand for copper is expected to increase, due to a significant growth in the cable (telecom) industry.
• Supply is expected to increase, due to higher capacity utilisation at Indo Gulf and Sterlite Industries' smelters.
• In the first half of 2000-01, average domestic prices increased, as compared with those in 1999-2000. Prices increased due to an increase in domestic demand and an increase in international prices. Domestic prices also increased due to the depreciation of the rupee vis-à-vis the dollar.
• Net profits of domestic copper producers are expected to increase due to an increase in sales and realisations.

• Demand for lead is expected to increase marginally, due to an increase in the demand for automobile batteries.
• Domestic production is expected to decline, as the cost of imports is lower than the cost of production of Indian producers.
• Imports are expected to be higher as compared with those in 1999-2000.
• Average domestic prices are expected to be lower as compared with those in 1999-2000, due to a decline in international prices.
• Net margins of domestic lead producers are expected to decline, due to a decline in prices.

• Demand for zinc is expected to be steady.
• Supply is expected to remain steady at the 1999-2000 levels.
• In the first half of 2000-01, average domestic prices increased, as compared with those in 1999-2000, due to an increase in international prices. Domestic prices also increased due to the depreciation of the rupee vis-à-vis the dollar.
• Operating margins and net margins of Hindustan Zinc Ltd. are expected to increase, due to an increase in prices.

	Tariffs (per cent)				Domestic price	International price	Landed cost
	1999-2000		2000-01		(Rs/tonne)	($/tonne)	(Rs/tonne)
	Customs	Excise	Customs	Excise	Jan 2001	Jan 2001	Jan 2001
Aluminium	27.5	16.0	32.6	16.0	94,167	1,612	121,961
Copper	38.5	16.0	44.0	16.0	146,700	1,788	146,413
Nickel	16.5	16.0	21.2	16.0	254,600	4,272	248,399
Lead	38.5	16.0	44.0	16.0	39,500	478	42,640
Zinc	38.5	16.0	44.0	16.0	82,000	1,033	86,648
Tin	27.5	16.0	32.6	16.0	375,600	5,170	380,036

na: Not available

Note:

1. Price type for international prices is cif Mumbai.
2. Market prices include excise duty, and are net of trade discounts.
3. Surcharge of 10 per cent on basic customs duty, levied in 1999-2000 Union Budget,has been included.
4. In the 1999-2000 Union Budget, the MODVAT credit was enhanced from 95 per cent of the excise duty paid on inputs to 100 per cent.
5. For 2000-01, the landed cost and customs duty include the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was was applicable only for non-traders, and hence, has not been included in the customs duty.

Compiled by CRIS INFAC

Non-ferrous metals: Domestic and international prices, and landed cost

	Tariffs (per cent)				Domestic price	International price	Landed cost
	1999-2000		2000-01		(Rs/tonne)	($/tonne)	(Rs/tonne)
	Customs	Excise	Customs	Excise	Jan 2001	Jan 2001	Jan 2001
Aluminium	27.5	16.0	32.6	16.0	94,167	1,612	121,961
Copper	38.5	16.0	44.0	16.0	146,700	1,788	146,413
Nickel	16.5	16.0	21.2	16.0	254,600	4,272	248,399
Lead	38.5	16.0	44.0	16.0	39,500	478	42,640
Zinc	38.5	16.0	44.0	16.0	82,000	1,033	86,648
Tin	27.5	16.0	32.6	16.0	375,600	5,170	380,036

Notes:

1. Domestic prices are market prices and international prices are LME cash.
2. Indian importers would have to pay a premium over the LME cash price in the range of $60-70.
3. Surcharge of 10 per cent on basic customs duty, levied in 1999-2000 Union Budget, has been included.
4. For 2000-01, the landed cost and customs duty include the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was applicable only for non-traders, and hence, has not been included in the customs duty.

Compiled by CRIS INFAC

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

Rediff-CRISIL Budget Impact Analysis

Budget 2001

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