Indian copper producers seek tax cut to navigate record rally

The latest market report highlights that Indian copper producers are seeking a domestic tax break, saying record metal prices are tying up working capital across the supply chain.

The Indian Primary Copper Producers Association is in talks with the government to softer the Goods and Services Tax on a range of copper to 5% from 18%, president Rohit Pathak stated on Wednesday. The policy change could unlock as much as $3.6 billion of capital at present tied up in tax payments, he stated.

Copper has set a series of record highs this year, climbing above $14,700 a ton on the London Metal Exchange this month. The surge is adding to cost pressures in India, which has relied heavily on imports since the 2018 shutdown of Vedanta Ltd.’s Sterlite smelter.

Elevated working-capital requirements are being felt across the industry, including by primary copper producers such as Hindalco Industries Ltd, which operates on a roughly three-month concentrate cycle, Pathak stated.

The upfront tax is borne by primary producers purchasing feedstock for processing, as well as downstream manufacturers buying copper products.

High tax “is locking up significant working capital that could otherwise be deployed toward industry expansion,” Pathak stated, adding that the domestic copper industry is in the midst of a multibillion dollar investment propel.

Surging copper prices are additionally prompting Indian cable makers and dealers to sharply reduce inventories, as stockpiling becomes increasingly costly. Inventories are now measured in days rather than weeks, Pathak stated.