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Primary Aluminium

Indian Union Budget 2023: An indirect boost to the aluminium industry

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The recently presented Union Budget for 2023 is said to be inclusive and development-oriented. Is that true for all sectors? The metal sector is overshadowed at a glance, for it was a lacklustre budget for the industry except for steel.

Prior to the budget, the Federation of Indian Chambers of Commerce and Industry (FICCI) was looking for a least 12.5 per cent hike in import duty for aluminium and its products from the current 10 per cent rate. The goal was to discourage imports and press domestic production. Currently, 60 per cent of the demand is fulfilled through imports.

Unfortunately, nothing of this nature was mentioned in the 2023 budget. Even then, it will be an eventful year for the industry as the ‘seven mantras’ guides the country towards long-term development.

Indirect boost to the aluminium industry

During the union budget, the finance minister, Nirmala Sitharaman, announced India’s vision for the next 25 years, also known as the ‘Amrit Kaal’ (pivotal period), leading up to the centenary of India’s independence. Seven agendas will drive the country’s growth and will guide the country through ‘Amrit Kaal.’

As one of its priorities, the budget once again focuses on infrastructure. The capital investment outlay has been increased by 33 per cent to INR 10 lakh crore. The railway has received INR 2.40 lakh crore in the transportation sector in funds.

The government identified the need for last and first-mile connectivity for ports, coal, steel, fertilizer, and food grains sectors and a hundred critical transport infrastructure projects will be undertaken. They will be prioritized with an investment of INR 75,000 crore, including INR 15,000 crore from private sources.

As the infrastructure, transportation, and logistics sectors boom, the aluminium industry will witness a surge in demand. These are the prime sectors that extensively use aluminium. Therefore, their growth may ensure a directly proportional development of the Indian aluminium industry.

Push to electric vehicle sector as India’s long-term commitment towards sustainability:

The Indian government is pushing in all four directions to lower the country’s carbon intensity by 45 per cent by 2030. The country is already in Phase II of the FAME policy (Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India). It strives to encourage faster EV adoption through a plethora of incentives towards EV ownership and electrifying public transport systems. In 2023, the government allocated INR 51.72 billion towards FAME-II, marking an 80 per cent increase in budget allocation from previous years.

In previous union budgets, the government has also taken several measures towards lubricating EV adoption, including:

  • Lowering GST rates on EVs by 5 per cent, allowing the sale of electricity for EV charging as an encouragement for the development of charging infrastructure
  • Issuing notification exemptions of permits in battery-operated vehicles
  • Establishing battery-swapping stations

In 2023, the union budget is encouraging Indian manufacturers to increase EV production, and at the same time, it is vehemently averting imports through:

  • Continuation of the concessional duty on lithium-ion cells for batteries till 31 March 2024.
  • Raising custom duty from 30 per cent to 35 per cent on vehicles (including EVs) in Semi Knock Down (SKD) form.
  • Increasing the custom duty on premium vehicles with specific engine capacity and prices that come in completely-built units (CBUs) from 60 per cent to 70 per cent.
  • Stretching exemption on customs duty exemption on import of capital goods and machinery required to manufacture lithium-ion cells for EV batteries.

After all the back and forth about EVs, the real question is, how does the Indian aluminium industry benefit? The new EV policies are the harbinger of hope for the aluminium industry.

Aluminium is a lightweight metal and using it to make EVs automatically reduces the car’s weight. The reduced weight allows the makers to lower the size and cost of the batteries, which extends the car’s range.

Additionally, aluminium is also better at ensuring the safety of the passengers. It absorbs most of the energy caused during an accident and protects the car’s structure and passengers. Aluminium usage is not limited to making auto bodies.

As the Indian government pushes manufacturers within the country to produce EVs, the demand for aluminium will eventually rise. Furthermore, as corporations instil sustainability at their cores, the need and popularity for green aluminium will skyrocket. Such low-carbon aluminium reduces the carbon footprint of EVs throughout their life cycle.

Wrapping up:

Although the 2023 union budget did not focus on the metal sector and the aluminium industry had no direct gains, there was a silver lining. As the government focuses on infrastructure, tourism, transportation and electric vehicles, the Indian aluminium sector will be at the receiving end in the long run.


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