Budget 2024 expectations: Hindustan Zinc CEO Arun Misra seeks customs duty hike on imports, PLIs for silver and more

India's zinc and silver producers need import tariff reductions on crucial machinery to encourage the adoption of modern and sustainable mining, Arun Misra, CEO of Hindustan Zinc Limited, told Mint in an exclusive interaction while sharing his expectations from the Interim Budget 2024-2025. Hindustan Zinc is one of the leading producers of zinc and silver globally.

The Interim Budget 2024-25 will be tabled by Finance Minister Nirmala Sitharaman on February 1 and is expected to be a vote-on-account that will give the government authority to spend certain sums of money till a new government comes to office after the April-May general elections. Mint spoke with Misra to understand how this budget can impact the zinc and silver industry.

Edited Excerpts:

What are your expectations from the upcoming budget regarding tax regimes?

First and foremost, there is a requirement to modernise mining infrastructure to maintain global competitiveness. This includes the need for import tariff reductions on necessary machinery to encourage the use of modern and sustainable mining technology.

In addition, there is a proposal to change royalty rates to encourage exploratory efforts. Exploring outside existing mining leases to diversify resources and examining the optimal use of mine tailings are also mentioned as ways to improve resource efficiency in the mining industry.

What do you expect from the 2024 budget that can boost India's zinc industry?

From the zinc industry's perspective, we expect the infrastructure projects to propel the usage of zinc, known for its durability and sustainability qualities, resulting in a galvanised economy. The investments under the Gati Shakti programme in railways, seaports, airports, and roadways by the Government of India up to the tune of ₹10 lakh crore is a promising zone for metals like zinc, lead, and silver.

Furthermore, it is proposed that the government adopt production-linked incentives (PLIs) for downstream metal processing. Such incentives can play a critical role in creating job opportunities, supporting technical developments, and harmonising with India's larger economic objectives. By rewarding downstream metal processing, the government can promote value chain expansion, contributing to the overall development and sustainability of the zinc- and silver-producing businesses.

Do you see the upcoming budget propelling India towards a net zero target?

To minimise zinc's carbon footprint, certain schemes and benefits can also be anticipated for renewable power investments. This will propel the futuristic vision of green growth and place India on the goal of net-zero by 2070 as industrialists will be encouraged to invest in various renewable power projects for their captive consumption and shift from thermal power.

What are the changes in the renewable energy sector you would like to see in the budget? What is the role of zinc in India’s energy needs?

In the next budget, important reforms are expected in the renewable energy (RE) sector to promote growth and strengthen India's position as a global leader in the transition to clean energy. Proposed changes include increasing PLIs for module manufacturing components, prioritising grid modernisation to ensure seamless integration of intermittent renewable energy sources, providing better incentives and collaborations for R&D, and introducing flexible financing solutions. Cost reduction remains a major concern in solar power, and the budget should prioritise it through increased PLIs, creative financing, and investments in energy storage.

The budget should devote significant resources to smart grid development and energy storage initiatives, while emphasising skilling and workforce development programmes to provide a trained workforce for the booming RE sector. Investments in next-generation technology research and development, as well as changes in tax regimes, can help to create downstream demand, encouraging domestic enterprises to play a larger part in the manufacture and supply of equipment for renewable energy projects.

Zinc plays an important role in India's energy needs through a variety of channels. Zinc is essential in infrastructure for preventing steel used in power transmission lines, towers, and other energy infrastructure against corrosion, hence increasing its lifespan and lowering maintenance costs. Zinc-battery technology, a developing energy storage alternative, has benefits such as increased longevity, fire safety, and scalability. Battery technology like advanced chemistry cells and zinc-air batteries pave the way for energy storage, and government focus in terms of investments and research holds the potential to subsume the pressure from critical minerals in the long run. Although zinc is not directly utilised in solar panels, it is a key component in the production of copper wiring and connections used in solar power plants.

Is there a possibility of modulating duty on imported zinc in the upcoming budget? What is India’s reliance on imported zinc?

There is a possibility of modulating the duty on imported zinc in the upcoming budget, considering India's demand and reliance on imported zinc. The country's annual need for total zinc metal is estimated to be 660 KT or 6,60,000 tonnes, and India now has a primary zinc production capacity of 880 KT, showing a surplus in domestic production. This makes India a net-exporter of Zinc in the global markets. However, roughly 23% of this demand is fulfilled through duty-free primary zinc imports under free trade agreements (FTAs).

To address this situation, the budget proposal is to review the free-trade agreements and increase the basic customs duty on the import of primary zinc products from 5 per cent to 7.5 per cent. This measure seeks to find a balance between encouraging domestic production and maintaining fair trade practices. In the previous fiscal year, Hindustan Zinc delivered around 480 KT of Zinc, with the remaining need, surpassing 200 KT, met by imports. Existing free trade agreements with other countries, which allow for duty-free imports without a minimum regional value addition criterion, may impede the promotion of the 'Make in India' initiative and sustainable development.

It is stressed that India's domestic zinc industry has made significant investments in plant construction, exploration of ore bodies for mining, and job creation along the value chain. Adjusting import duties aims to promote self-reliance, protect domestic industries, and create long-term growth inside the country. Lastly, with the expansion plans of Hindustan Zinc, we are sufficient to develop and cater to the demand growth for a galvanised economy.