Union Budget 2018 brings hopes galore for Indian aluminium industry, but zero promises

Judging by the somewhat stoic reaction of the Indian aluminium industry after the unveiling of Budget 2018 last Thursday, February 1, it is not hard to tell that the announcements have failed its expectations. Not a single demand or wish from the list of many has been addressed in the last budget presented by the NDA government before elections.

But nonetheless, the Budget spoke of an economy built on advanced infrastructure, enhanced manufacturing and greater employment. There are areas of hope which can certainly give the right traction to the Indian aluminium industry as a whole.

Five points of hope for Indian aluminium industry in Budget 2018:

1. It is a Budget guided by mission to strengthen agriculture, rural development, health, education, employment, MSME and infrastructure sectors - which means consumer spending will increase boosting key aluminium end user industry demand.
2. INR 5.97 lakh crore has been allocated for infrastructure development. Railway capex has been pegged at INR 1.48 lakh crore with plans for more trains and stations. Aviation industry spending has also been upped.
3. Out of 100 smart cities 99 cities have been selected, with an outlay of INR 2.04 lakh crore.

There is a positive correlation between infrastructural development and aluminium consumption. With increased spending in Infrastructure and Building & Construction sector and more focus on “green building” construction and sustainable development, the overall consumption of aluminium is expected to increase over the long term.

4. Proposal to extend reduced rate of 25 per cent currently available for companies with turnover of less than 50 crore (in Financial Year 2015-16), to companies reporting turnover up to INR 250 crore in Financial Year 2016-17, to benefit micro, small and medium enterprises. The move would help aluminium allied industry players to scale their businesses and MSME start-ups in downstream aluminium sector.

5. Proposed changes in customs duty to promote creation of more jobs in the country and also to incentivise domestic value addition and 'Make in India' in sectors such as electronics, auto components, and furniture. Again downstream aluminium sector companies manufacturing aluminium automotive parts, aluminium rolled products, and/or aluminium extruded products can expect to survive and make profits in the face of global competition.

(Source of Budget highlights: Economic Times)

Union Budget 2018 did not deliver directly as per Indian aluminium industry’s expectations but definitely presented opportunities cashing on which the downstream sector can flourish and create a demand pull for the entire value-chain. As far as cost containment for the upstream sector is concerned, it seems the aluminium industry has to wait a little longer to hear something more concrete from the FinMin.