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Friday, Jul 09, 2004

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Customs duty cut on metals: Major price impact unlikely

Dhimant Bhatt

Mumbai , July 8

THE proposed reduction of 5 per cent customs duty on base metals including copper, lead and zinc in the Union Budget 2004-05 will not have much impact on prices and import inflows in the immediate future.

The Union Finance Minister on Thursday proposed to reduce the peak rate on such metals to 15 per cent from current 20 per cent level. However, customs duty on aluminium is unchanged at 15 per cent.

"There is no major impact on price level. Traders or importers are not in a hurry to make any commitments. Toady, price volatility is less. Movement of LME prices and rupee-dollar volatility will play a major role," a leading trader said.

"As a result of 5 per cent reduction on base metals, major domestic producers of copper, zinc and lead such as Sterlite Industries, Birla Copper, Hindustan Copper and Hindustan Zinc Ltd will have some negative impact as they will have to compete with imported cheap material. On the other hand, rural infrastructure, telecom and power sectors will increase some demand of such metals," an analyst said.

"Any way, imports will not increase much as a result of the proposed 5 per cent reduction. Copper imports are flooded with the market and there is no scarcity of any metals. Also, domestic metal producers are supplying enough quantity as and when required," Mr Rohit Shah, BME President, told Business Line.

"Base metals traders in the city were largely disappointed with the Budget, as their demand was not met. The Bombay Metals Exchange (BME) had repeatedly requested the Union Government for a 10 per cent differential duty between raw material and finished product in the Budget,"

The BME appealed to the Government to keep customs duty on copper scrap, copper wire bars, copper cut pieces at 5 per cent and on copper tubes for use in refrigeration machines and refrigerators at 20 per cent.

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