Industry
38 PSUs Achieved the Target of 20% Public Procurement from MSME
Thirty Eight CPSUs have achieved the target of 20% public procurement from MSMEs in the just concluded financial year. This was revealed in a meeting chaired by Kalraj Mishra, Union Minister for MSME, to review the implementation of Public Procurement from MSMEs. Mishra highlighted the importance of this policy which was made mandatory by the Govt from April 2015, to the promote MSMEs and Startups in the country. He said that to promote the Startups in India his ministry has issued a circular dated 10th March 2016 that allows Central PSUs to relax the norms of 'prior experience and prior turnover' for those MSMEs who can deliver the goods as per prescribed technical & quality specifications. He also highlighted that the CPSUs have to take proactive action to achieve targets of 20% annual procurement from MSMEs including 4% from MSMEs owned by SC/ STs. Mishra mentioned that a SC/ ST Hub has been setup in his ministry to promote the development of SC/ST entrepreneurs. This Hub will provide avenues for SC/ST entrepreneurs under public procurement policy, encourage them to register under Udyog Aadhar Memorandum, encourage them to register products manufactured by them, facilitate their participation in vendor development programmes organized by CPSUs and sponsor their applications under PMEGP. He also highlighted that to improve ease of doing business his ministry has launched Udyog Aadhar Memorandum, an online registration for MSMEs in October 2015. Within a short span more than 3.8 lakh UAMs have been filed. Minister of State Giriraj Singh also highlighted the importance of developing critical components, import substitution, maintenance of spares of high tech machines and equipments by CPSUs. He also highlighted that organizing vendor development programmes and entering into rate contracts with MSMEs are the key to enhancing public procurement. The meeting was attended by representatives from 44 CPSUs. During the meeting, issues related to achieving 20% procurement targets were highlighted and the ways to achieve them were also discussed.
Problems and Prospects of Copper Industry
As per Wood Mackenzie report on copper outlook, the copper market is expected to grow at a rate of 3.3%. The Indian primary refined copper industry consists of three players - Hindustan Copper Ltd, Hindalco Industries Ltd and Vedanta Limited having a combined capacity of 10 lakh per annum of refined copper and the total capital employed is nearly Rs. 10,000 crores. Hindustan Copper was the pioneer in the industry and has integrated facilities. The other two producers in the private sector are custom smelters which process imported copper concentrate. The Copper is a critical input for various industries, viz. Power, Defence and Infrastructure and a key indicator of a country's economic development. India has huge potential for increasing copper consumption with the current per capita consumption in India (about 0.6 kg) being just one-tenth of that in China. However, the raw material of the industry, i.e. copper concentrate, is available very scarcely in India, making it imperative for the country to either import refined copper or import copper concentrate. Nearly, 96% of the requirement for copper concentrates is met through imports. Against this structural backdrop, the private players set-up custom copper smelters in India in the mid-nineties based on import of copper concentrate. The viable operations in such a conversion-based industry are possible only if large-scale plants are set-up. Thus, the production capacity was increased ahead of the current market size in India. The capacities were set up with world-class technologies having environment performance at par with the best in the world. Currently, while the industry's capacity stands at 10 lakh tpa, domestic market is around 5 lakh tpa which forces the industry to export a significant part of its output.
The establishment of domestic refined copper industry has not only helped in import substitution, but has been instrumental in the development of a downstream industry, featuring around 800 units predominantly in the SME sector. The country's copper capacity will be crucial in meeting the large requirement for copper that would arise due to the focus on development of the infrastructure.
Indian Refined Copper Industry's situation:
As a comparison India produces only 0.77 Million Tonnes (MT) of refined copper every year by the copper smelters in India, who have to depend 95% on import of copper concentrate because India has negligible copper reserves. The Industry has infused huge capital exceeding Rs -10,000/-crores and deploys more than 15000 workforce with a signi ficant generation of indirect employment in the country. It also supports development of large ancillary SSI/SME industry and vendor base in the neighborhood. Major Challenges:
>> Conversion Business on very thin Margin: The custom copper smelting model in India which is also prevalent in China & Japan operates as a conversion business on very thin margins due to non-availability of local copper concentrate. The producers import copper concentrate at the ruling copper prices on London Metals Exchange (LME) after deducting the internationally negotiated Treatment and Refining Charges (TCRC) and sell the produce at ruling LME plus premium. Thus, LME is a pass-through for custom smelters in India and other countries. In fact, at higher copper prices, the need for the working capital also increases, imposing an additional financial burden.
>> India's Exports of copper- Discontinuation of 2% incentive under new MEIS: During the year 2014-15 India exported approx. worth US$ 2439 million and has the potential to grow further. The export incentive @2% available under MLFPS hitherto, is no longer available.The Industry is forced to export as the cheaper imports are replacing demand for Indian products.
>> Huge working capital pressure: Due to the inventory requirement of the industry for a high value metal, the industry is forced to employ huge working capital. This coupled with the high interest cost in the country makes the industry non-competitive vis--vis global peers.
>> Threat of Inverted Duty Structure: On top of the issues already faced by the industry, the situation has worsened further after the implementation of various Free Trade Agreements which began a few years ago. The removal of tariff barriers on Chapter 74, items under various FTAs has opened flood-gates for imports which Indian industry is not in a position to compete with. Some of the major threats to the industry due to the inverted duty structure caused by the FTA's are from ASEAN region (AIFTA) and from Japan (India- Japan CEPA).The import of Copper Cathode and Copper Rods from Japan has grown over the years.
>> Imports through Information Technology Act: As per the IT Act, the Government has enabled the Indian manufacturers to import duty-free copper in case of the produced goods being deployed in the IT industry. Though this is done with the good intent for the growth of the IT and Communication Sector, the country has witnessed imports of Copper Rod of 8mm dia duty free which is widely manufactured within the country. As per industry estimates, more than 25000 MT of copper is imported into the country through the IT Act. This has resulted in loss of valuable foreign exchange in-spite of existing capacity within the country which could've been catered through the deemed exports group.
Need to protect Indian copper industry:
In view of the recent slow/stagnant growth in European, USA and Chinese economy, there is a clear threat that Chilean producers shall penetrate Indian markets by dumping refined copper in order to gain a foothold in the emerging Indian market. Thus any proposal to reduce basic duty on copper cathode or copper wires and rods will have significant and immediate adverse implications on sustainable operation of Indian copper industry as well as the Government revenues and forex earning, thus does not seem to be helping the country's interest and will lead to:-
* Domestic refined copper industry becoming unviable and associated impact on investment and jobs
* Dependence on imports for strategic metal like copper
* Multifold jump in refined copper imports leading to higher foreign exchange outflows
* Annual export of almost US$ 2.5 billion by Copper industry will cease
It is evident that there is a huge surge in import of refined copper which was at a level of 106000MT in the year 2012-13 and will cross to 235000 MT during the financial year 2015-16 registering a jump of more than 100% in four years. Since the Indian domestic producers are struggling with the imports of the refined copper from other countries, any duty concession allowed for refined copper imports will hurt the domestic industry which is against the "Make in India" campaign of the Hon'ble Prime Minister.