The Hindu Business Line : Illegal copper scrap import hitting domestic producers

ILLEGAL imports of copper scrap into the country are hurting domestic copper producers, electrical products manufacturers and other users. Such imports were over 1.50 lakh tonnes last year in different forms such as copper druid (contain roughly 22 per cent copper) and residue (copper dust powder), according to industry sources.

The main factor behind such large imports is huge amount of duty evasion through under-invoicing. Various methods such as direct under invoicing, weight manipulation of containers, mis-declaration of grade of scrap and mis-declaration of commodity, sources said, are followed for under-invoicing.

"Illegitimate imports are affecting all copper users and manufacturers of electrical products. Imported copper scrap, druid, residues and dross get converted to a low purity wire bar and thereafter into low purity copper wires and cables. These cables pose a safety hazard. Recovery of metal from druid, residue, and other similar waste materials is a major environmental hazard," an official of a primary producer of copper said.

The loss of revenue to the Government on account of this is projected at Rs 280-300 crore annually. This is also giving unfair advantage to "unscrupulous elements" at the cost of domestic copper producers.

"Such imports affect all electrical products industries, specially the manufacturers of super enamelled wires, domestic wire and cable industry. The consumers are the ultimate sufferers, because use of scrap copper results in more electricity consumption. Further, the electricity boards also suffer as power is provided free for farmers in many States. The un-organised sector, which makes its products using this scrap material, is the beneficiary," Mr Gopal Kabra, President of R.R. Cable Ltd, a wires and cable manufacturers, told Business Line.

"We are also aware of such practice. Our council's principal objective is to promote the beneficial usage of copper for safety, health, environment and energy savings. But with usage of low quality copper, energy efficiency level will come down and it also breaches safety standards," Mr Tarun Grover, Chief Executive Officer of International Copper Promotion Council (India) told Business Line.

The Government could implement fixation of a floor price or tariff value based on international prices, according to industry experts. This should be changed every month based on the average London Metal Exchange (LME) price. Imports "invoiced" below this floor price should be charged customs and excise duty as per the floor price. Also, there should be more stringent checks by customs on imports of all kinds of scrap, druid and residues. Entry of scrap should be restricted to a few earmarked ports having necessary analytical facilities, they said.

Globally, the price of copper grades is determined by the rates of grade `A' traded on the LME plus a premium to cover handling, transportation and transaction costs.

The price of scrap is normally traded $50-$250 a tonne below this and is based on the traded grade.

The total import duty on copper products is work out to 34 per cent of c.i.f value, including 15 per cent basic customs duty plus 19 per cent effective countervailing duty.

In the case of druid and scrap products, imports reportedly have two components of mis-declaration. One, the importer declares a lower content and two, under-invoicing. The total duty evasion thus work out to $670 a tonne (Rs 30,000 a tonne) considering the fact that actual import price is about $2000 per tonne. Against this, the declared import price of scrap is $250-350 per tonne.

Actual copper content in druid is about 80 per cent whereas it is declared as containing 20 per cent.

The bulk of the scrap imports are done at Mumbai, JNPT, Mulund CFS,

ICD Thublakbad (Delhi), Kandla and Chennai ports.

In absence of timely data, the customs officials job is also rendered difficult, the sources said.

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Illegal copper scrap import hitting domestic producers