The Indian Government may tweak customs duties on several commodities, including copper and aluminum, in the forthcoming Budget FY22 on Feb 1, according to Kotak Securities.
The year 2020 witnessed sharp volatility across commodities as prices slumped earlier in the year owing to demand disruptions but recovered on the back of stimulus measures and robust Chinese buying, as is evident from higher commodity imports., the company said.
In the case of copper, markets are expecting a reduction in custom duties on copper scrap to promote domestic manufacturing and exports, while the duties on copper concentrate could be removed.
The reduction in import duty of copper concentrate may bring down the cost of production for copper producers but may not have any direct impact on MCX copper prices, the company said.
The company further said that in the case of aluminum, domestic manufacturers have urged the government to raise basic customs duty on both the Primary aluminum and aluminum scrap from present 7.5pc and 2.5pc, respectively, to 10pc to rein in the rising imports.
Kotak Securities also informed that the aluminum producers also want to eliminate GST compensation cess on coal to support the power-intensive aluminum industry.
It further said that except for any changes in customs duty on primary aluminum, there may be no direct impact on MCX aluminum prices, while an increase may lead to a rise in MCX aluminum prices.
Apart from that, an increased infrastructure spending, sops to boost the real estate and automobile sector may have a positive impact on domestic demand for metals like copper, aluminum, and lead, however, may not devolve into any major price movement, the company said.
The company added that 2020 was a challenging year for India as the COVID-19 pandemic has affected the economic growth in the country. The economic recovery is expected to be slow and labored and government support will be needed to boost the pace.
The focus of the Budget 2021-2022 could be largely to mend the economy and boost growth and fight inflationary pressures, Kotak Securities said.