Sterlite Industries (India) Limited - Sterlite Industries India Ltd.

In addition, the Finance Act (2 of 2004) of India, which has been in effect since July 8, 2004, levies an additional surcharge at the rate of
2.0% of the total customs duty payable which has been further increased to 3.0% of the total customs duty payable effective March 1, 2007. We
are also liable to pay an additional duty of customs (CVD), of 8.0% of the assessable value and basic custom duty, which is levied on imports
in India.
In January 2004, the special additional duty, or SAD, of 4% which was also levied on imports of copper, zinc and aluminum was abolished,
reducing the effective customs duties levied on all imports. The Government of India may reduce or abolish customs duties on copper and
aluminum in the future, although the timing and extent of such reductions cannot be predicted. As we sell the majority of the commodities we
produce in India, any further reduction in Indian tariffs on imports will decrease the premiums we receive in respect of those sales. Our
profitability is dependent to a small extent on the continuation of import duties and any reduction would have an adverse effect on our results
of operations and financial condition.
Export Incentives
The Government of India provides a variety of export incentives to Indian companies. Indian exports of copper, aluminum and zinc receive
assistance premiums from the Government of India. Export incentives do not outweigh the Indian market price premiums. Accordingly,
notwithstanding the export incentives, we endeavor to sell as large a quantity of our products as possible domestically.
In fiscal 2007, 2008 and 2009, exports accounted for 63.4%, 56.6% and 39.2%, respectively, of our copper business’ net sales. The
following table sets forth the export assistance premiums, either as Indian Rupees per ton of exports or as a percentage of the FOB value of
exports, on copper cathode and copper rods for the period indicated:
July 15, 2006 to Present
(percentage of FOB value of exports)
Copper cathode 2.2% (1)
Copper rods 2.2% (2)
Notes:
(1) Subject to a cap of Rs. 7,500 per ton.
(2) Subject to a cap of Rs. 7,760 per ton.
In fiscal 2007, 2008 and 2009, exports accounted for 49.7%, 31.5% and 35.1%, respectively, of our zinc business’ net sales. The following
table sets forth the export assistance premiums, as a percentage of the FOB value of exports, on zinc concentrate, zinc ingots and lead
concentrate for the periods indicated:
April 1, 2007 October 9, 2007 to November 5, 2008
to October 8, 2007 November 3, 2008 November 4, 2008 to Present
(percentage of FOB value of exports)
Zinc concentrate 5.0% 3.0% 2.0% 3.0%
Zinc ingots 7.0% 5.0% 4.0% 5.0%
Lead concentrate 5.0% 3.0% 3.0% 3.0%
In fiscal 2007, 2008 and 2009, exports accounted for 28.0%, 24.7% and 16.9%, respectively, of our aluminum business’ net sales. The
following table sets forth the export assistance premiums, as a percentage of the FOB value of exports, on aluminum ingots, aluminum rods and
aluminum rolled products for the periods indicated:
April 1, 2007 to October 8, 2007 October 9, 2007 to Present
(percentage of FOB value of exports)
Aluminum ingots 5.0% 3.0%
Aluminum rods 5.0% 5.0%
Aluminum rolled products 6.0% 4.0%
The Government of India may further reduce export incentives in the future, which would adversely affect our results of operations.
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