The Indian Metal Recycling Industry, which recycles metals like steel, aluminium, copper and zinc – mostly from automotive, power, infrastructure, construction and white goods industry – is set to register an annual growth of 11.4 per cent by 2020 and, considering the growth potential, needs immediate policy intervention, according to a study report Metal Recycling Sector: Contributor to National Wealth released at the Metal Recycling Conference held in Mumbai recently.
The conference, which was organised by Metal Recycling Association of India (MRAI), the apex body of India’s ferrous and non-ferrous metals recycling industry, focused on prospects, issues and challenges of Indian metal recycling industry.” The report was unveiled in the presence of Vishnu Deo Sai, Minister of State, Steel and Mines, Government of India and Subhash Desai, Minister of Industries, Maharashtra.
The report further noted that the potential of metal recycling industry is not fully utilised and hence, there is more burden on primary production – resulting in depletion of natural resources. A strong policy regime can not only turn the fortunes of this industry favourably by throwing up immense economic opportunities, but will also help convert waste into wealth for the nation, the report stated.
During the conference, MRAI urged the government to help the metal recycling industry which has been badly affected by heavy import duty, Special Additional Duty (SAD) regime and certain Free Trade Agreements (FTAs) with countries that is making metal recycling unviable for Indian industry.
Urging the Ministry of Steel and Mines to consider the removal of import duty and SAD that is levied on imported scrap products on immediate basis in the forthcoming budget, the association pointed out that immediate intervention by government would save the already bleeding industry from dying, and also requested the Government of Maharashtra to create special recycling zones in the state.
One speaker at the conference noted that increasing competition in this industry is become challenging today with everyone trying to get a larger share of the ‘pie’. Therefore, there was a need for creating a ‘blue ocean’ with uncontested market space, besides a plan with long-term vision and building an ecosystem rather than isolated space, he said.
Another speaker said India has become mostly unsafe and labour-intensive where recycled metals are being used in semi-finished and finished goods, and secondary metal recycling is the seamless source of such material. Also, while other countries dealing in metal recycling have no import duty on metal imports, India still levies duty in this regard. Besides lack of metal recycling legislation, about 1.8 million Indians are involved in the recycling industry which is the major source of supply to the Indian Industry today, according to the MRAI.
Ikbal Nathani, President, MRAI, lamented that while Indian industries have lots of problems, the recycling industry has no maa-baap. Urging for removing this industry from kabadi status, he said the previous government suddenly imposed import duty on metal scrap and today India remained the only country globally to have such duty on scrap – with the result that even companies in South India were virtually “crying” because of this.
“Indian foundry units are facing severe threat of losing Rs 11,000 crore worth of export business to competing countries like China and Taiwan. Costs have gone up by Rs 600-700 per ton for steel melting scrap, and by Rs 2,500 per ton for stainless steel. The 25 per cent import duty on scrap recycling machinery is adversely affecting the industry. Lack of finish quality makes working conditions difficult and unsafe.”
“Import duties on scrap should move in tandem with finished product’s duty structure. Removing basic import duty and ensuring strict quality adherence for imports will benefit the industry as cost of local finished products is more expensive than imported scrap. India’s secondary metal manufacturers pre-dominantly rely on imported scraps as its’ prime raw material feed to generate production of value added goods. Since last many years, there was no import duty on the metal scrap but suddenly import duties have been levied on the environment friendly industry. On all imports of metal scraps, manufacturers have to pay Special Additional Duty (SAD) of four per cent, which is passed as CENVAT credit. The Total Cost of Savings on Steel Production – if 100 per cent produced through secondary manufacturing – would be around Rs 1,19,633 crores.”
“China is dumping billets on us. The present government is trying to remove import duty on metal scrap and, with the national budget nor far away, this can be done. Our association did a study of the metal scrap industry in India and recommended removal of this duty. The steel ministry made a study and now files need to move fast. We are pleading with the government to implement the recommendations fast.”
“Free Trade Agreements (FTAs) are signed by our ministers abroad but its impact is not known by them – that this will result in Indian labour being unemployed. I request for FTAs to be taken off. India’s production today is 85 million tonnes of steel including one million of non-ferrous and four to five million tonnes of ferrous scrap. Also, please give MRAI a place on your committee. Import duty should go immediately or by next year, our metal recycling industry will close down,” Nathani cautioned, while adding, “We need to also refund credits to those units of the recycling industry that have closed down for being unviable.”
Nathani urged for setting up of “recycling zones” in India. “Give us such areas on long-term lease to ensure safe processing units instead of dangerous recycling workplaces. Take away the import duty, SAD (as it is not a revenue earner), FTA is not needed. ASEAN countries do change bill of lading. Please help us to survive and grow,” he said.
Vishnu Deo Sai, Minister of State, Steel and Mines, Government of India, said the Metal Recycling Industry is certainly important as it converts waste material into wealth and thus protects environment, besides saving energy, health and natural resources. The ministry will coordinate with the finance ministry and look into the aspects of import duty on scrap, SAD and FTAs with a view to solve the problems being faced by Indian Metal Recycling Industry, besides also looking into the recommendations of the Joint Parliamentary Committee, he said.
Subhash Desai, Minister of Industries, Government of Maharashtra, said that the government would review the proposal of the metal recycling industry to the Maharashtra state government for considering allocation of special recycling zones to them. “This recycling industry is saving natural resources and energy and, unfortunately, it is not getting the recognition it deserves. The import duty is its problem and it also needs specialised zones in all state. I will take this cause forward by arranging dialogue between the recycling industry and my colleagues to set up different recycling zones in Maharashtra,” he said.
However, the problem was that industry leaders often demanded setting up of such industries near coasts, ports, airports, Desai said while pointing out the government had no lands in industrial cities like Thane, Pune, Nasik except in other areas including the Delhi-Mumbai Industrial Corridor which presented a good opportunity for various types of industries. “We (Maharashtra government) have already acquired such land in Aurangabad where manpower is available in that region. So you can set up your recycling zone in part of it. You save electricity as recycling uses barely five per cent of energy. All states must implement this as this is also contributing to “Swachh Bharat Abhiyan,” he added.
MRAI said that with a view to ensure the fast track growth of the industry, Metal Industry Association of India has sought an implementation of Metal Recycling Policy duly supported by an ‘industry-status’ recognition. As the industry grows at a CAGR of 11.4 per cent, this will increase contribution of metals recycling to the GDP and ensure sustainable growth coupled with preservation of natural resources, it noted. It further said that while the global recycling industry generates an annual revenue of $500 billion, India is lagging much behind. The government needed to immediately intervene and draft a +Metal Recycling Policy+ to grant industry status to this sector and rationalise duty structures to make it a globally competitive. With this, the government will be a net revenue earner while saving environment and energy. With a better flow of raw materials, the industry can thus help achieve mission of both “Swachh Bharat Abhiyan” and “Make in India”.
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India's steel consumption grew by 3.5 per cent to 62.98 million tones (MT) during April-January period of the current fiscal. Steel production grew by 5.3 per cent to 75.79 MT in the same period, while imports of total finished steel gone up by 60.9 per cent to 7.4 MT. Exports declined by 12.9 per cent to 4.3 MT. The rise in consumption might augur well for domestic steel-makers, almost all of which are raising their capacity to contribute to government’s aim of trebling installed capacity to 300 million tonnes per annum by 2025-2026. It may be noted that consumption growth was subdued at 1.4 per cent during April-December period of the current fiscal. The country, which is the 4th largest steel maker in the world, had consumed 60.844 MT steel in the corresponding period last year, data compiled by Joint Plant Committee (JPC) showed. JPC is a body under the steel ministry. Steel consumption was up by just 0.6 per cent in the entire 2013-2014, its lowest in four years, at 73.93 MT compared to the previous year.
Over 75 per cent of Indian steel manufacturing units use iron ore as raw material and coal as fuel. For the past few years, these minerals – being abundant in the country and used for steel-making – have now become “limiting factors.” Since 2011, the iron ore mining restrictions and the recent coal blocks de-allocation have affected production, availability and sentiments, ultimately effecting the price dynamics of finished and semi-finished products. As a result, using sponge iron has become an expensive affair and has squeezed the profit margin of manufacturers. On the contrary, scrap prices have declined by around 15 per cent in the global market over the past nine months and, considering this scenario and exchange rates, one might see five-six million tones of scrap import, very similar to FY13.
On the production front, major firms such as SAIL, Tata Steel, JSW and RINL together produced 38.6 MT during April-January, clocking a 3.3 per cent growth over the same period last fiscal. The rest was by mini and other producers. The industry has sought following initiatives by government on urgent basis: Industry Status and Policy to Metal Recycling Sector: Policy to be framed to promote the sector such as Recycling zones/ clusters, incentives, subsidies; Exemption of Special Additional Duty (SAD): SAD of four per cent has to be exempted for recycling sector as it adds to the tax burden that is passed as CENVAT credit which remains unused; Amending the CENVAT Act: To allow SAD Refund for companies filing closure and Cenvat Credit to be allowed for adjustment against fresh import, if not utilized within 90 days; Removal of Basic Import Duty: Basic Customs duty levied on imports of Ferrous & Non Ferrous Scrap to be removed as Indian manufacturers stand to lose market share vis-a-vis other emerging countries due to higher import tariff on metal scrap; Inverted Duty Structure on account of FTAs (Foreign Trade Agreements) needs to be corrected: FTAs with partner countries to be corrected to avoid inverted Duty structure – raw materials cost higher than imported semi /finished metal products.
The MRAI, which is a national association representing India’s ferrous and non-ferrous metals recycling industry with headquarters in Mumbai, brings under one umbrella all various regional recycling associations that are currently active as well individual companies as its members. Among its many services, MRAI promotes public awareness of the value and importance of recycling along with the positive environmental benefits derived from metals recycling. As part of this effort, MRAI advocates on behalf of the industry before the Indian Government (Ministry of Environment and Forests, Steel Ministry, DGFT, State Pollution Control Boards, Port Authorities and others) to help ensure the free and fair trade of metal scrap.