Aluminium producers have urged the government to continue MEIS scheme for the industry as exports worth $5 billion are at stake.

In a letter sent on Tuesday, the Aluminium Association of India (AAI) has urged the Finance Minister and Commerce Minister to continue with the processing of MEIS (Merchandise Exports from India Scheme) applications through DGFT MEIS Portal.

It has sought continuation of MEIS scheme with enhanced rate from 2 per cent to 5 per cent for all aluminium products to survive the current economic situation.

This letter was sent in wake of the government envisaging cutting the funds outlay for MEIS (Merchandise Exports from India Scheme) from around Rs 45,000 crore in FY 2019-20 to Rs 9,000 Crore for April-December 2020 and diverting these funds for other purposes.

The DGFT has also blocked the MEIS module from July 23 from accepting new applications to limit the issuance of any more scrips.

This has created an extremely precarious situation for the Indian aluminium exports which have declined by 11 per cent from $5.7 billion in FY-19 to $5 billion in FY-20 and further will render exports vulnerable and uncompetitive vis-a-vis global players in international markets.

The aluminium body also demanded inclusion of aluminium in Product Linked Incentive Scheme and implementation of Remission of Duties or Taxes on Export Products (RoDTEP) scheme on priority for aluminium industry to make India's aluminium exports competitive and create a level playing field for Indian exporters vis-a-vis global players in international markets.

Being a continuous process industry, all the Indian Aluminium smelters are operating in the country at around 90 per cent capacity.

The slump in domestic demand is hurting the domestic aluminium industry and it will take substantial time for the domestic demand to pick up.

The only option left for the industry to sustain is to export the aluminium products to survive the current situation due to Covid-19 pandemic, but the prices are expected to continue to be weak due to demand slump globally.

Aluminium exports from India are struggling to remain globally competitive due high incidence of unrebated central and state taxes and duties, constituting 15 per cent of aluminium production cost which is amongst the highest in the world.

This is adversely impacting the sustainability and competitiveness of the industry. This is in sharp contrast to global aluminium industry which is heavily supported by major aluminium producing countries specially China, by way of various incentives/subsidies for raw materials, tax benefits & export tax incentives, low interest rate loans etc. to enhance the cost-competitiveness.

Aluminium exports are currently eligible for a 2 per cent MEIS reward rate which itself does not provide ample cushion to remain competitive against current bearish market condition which is likely to last long.

The RoDTEP Scheme (Remission of Duties or Taxes on Export Products) for exports is yet to be formulated and implemented by the Government, which was announced in September 2019 by Finance Minister and approved by the Cabinet in March 2020. While the domestic industry is trying its best to remain competitive, government support is extremely crucial at this juncture to boost exports and survive this challenging phase.

The government has identified aluminium amongst 12 Champion Sectors, where India can be a global leader and major supplier. The industry has massive potential to double the exports to the tune of $10 billion forex earning in the near future. Aluminium exports which contributed $5.7 billion to India's forex earning in FY-19, i.e. 1.7 per cent of total Indian exports ($330 billion).