Indian copper producers are seeking a domestic tax break to address record metal prices that are tying up working capital across the supply chain. The Indian Primary Copper Producers Association is in talks with the government to lower the Goods and Services Tax on a range of copper to 5% from 18%, according to President Rohit Pathak. The policy change could unlock as much as $3.6 billion of capital currently tied up in tax payments.

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. Higher 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 said.

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 said, adding that the domestic copper industry is in the midst of a multibillion dollar investment push. Surging copper prices are also 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 said.