Asked whether Sterlite and Indal are pulling together in the Aluminium Association of India (AAI), a top Indal executive who represents the AAI interests to the finance ministry, said that Sterlite was also part of the efforts to bring the finance minister round to the requirements of the downstream sector.

AAI, of which both Sterlite and Indal are members, has urged the finance ministry to consider its pleas for reducing the customs duty on recycled scrap, citing it was crucial for revitalising downstream aluminium producers.Former finance minister P Chidambaram had mortally injured the prospects of the value-added products manufacturers by raising the duty on such scrap from 12 per cent to 25 per cent in the union budget for 1997-98. AAI isnow busy lobbying with the finance ministry to have the duty reduced to around 10 per cent.

"We are making representations to the finance ministry to urge them to incorporate the industry pleas in the new act," AAI sources told The Financial Express

.The association has cited that due to the higher duty on scrap, it has become extremely difficult for the aluminium majors to go in for scrap melting to make metal, instead of the traditional power-intensive smelting process. Using baled and briquetted aluminium scrap, the manufacturers can make aluminium at nearly one-tenth the power as well as manufacturing costs.

Indal has already set up such a scrap smelter in Taloja, and proposes to use this method to sidestep problems it has had in the past with regard to use of power, especially at its Belgaum smelter.

But while the finance minister has brought down duty on recycled steel scrap from 10 per cent to five per cent, he has stuck to the previous 25 per cent duty on aluminium recycled scrap, notalleviating the problems of the downstream aluminium manufacturers.

AAI has proposed that duty on primary aluminium be reduced to 15 per cent, that on scrap be reduced further to 5-10 per cent and added protection to the downstream sector by hiking import duty on semi-fabricated products to 30 per cent. The present duty on all the three categories is 25 per cent.Industry sources, representing the downstream sector, said: "70 per cent of the cost of aluminium downstream products is primary metal cost. Therefore, any increase in the cost of primary metal not only stagnates demand but also affects adversely the viability of the downstream units."

As a result, despite declining international prices in recent months, the primary producers have managed to hold on to their prices as imports have become even more prohibitive with the rupee depreciating against the dollar.Several of the downstream units in the country are either operating on loss or have been forced to close down operations, they pointedout.

With lowering of import duty on primary aluminium, Indian companies can export aluminium to the Middle East and south-east Asian regions, toll them in their idle smelters into aluminium, and import them back to India at competitive rates.