Downstream aluminium manufacturers have requested the government to lower import duties on primary metal and scrap to combat rising input costs. These smaller firms report a sharp decline in profit margins due to high global prices and an inverted tax structure. A duty reduction could lower production expenses, though the move may face opposition from large primary aluminium producers.
Micro, small, and medium-sized enterprises (MSMEs) in India’s downstream aluminium sector are urging the government to reduce customs duties on primary aluminium and scrap. The appeal, led by industry groups such as the Aluminium Secondary Manufacturers Association and the Cables and Conductors Manufacturers Association of India, targets the current effective import duties of 8.25% on primary metal and 2.75% on scrap.
These associations argue that the existing tax framework forces domestic prices to track import parity, which disproportionately hurts smaller manufacturers who lack the scale of large integrated producers. According to industry reports, these downstream units have experienced significant margin compression in recent years, with profit margins falling by up to 70% as input costs remain elevated.
Impact of Input Costs and Tax Structures
Manufacturers are currently dealing with a 20-35% rise in input costs over the last three months, driven by volatile global metal prices and high freight charges. A critical concern raised by these firms is the presence of an inverted duty structure. In this scenario, finished aluminium products can sometimes enter the Indian market under free trade agreements with very low duties, while the raw material used by domestic factories remains subject to higher tariffs.
This gap limits the competitiveness of sectors including cable and conductor manufacturing, energy storage, and extrusion units. While India has substantial growth potential—with per capita aluminium consumption at 2.5 kg compared to the global average of 11 kg—these cost pressures act as a barrier to expanding local production capacity.
Future Challenges and Industry Outlook
The debate over duty structures also considers international trade regulations, specifically the European Union’s Carbon Border Adjustment Mechanism (CBAM). As India aims to increase value addition within its domestic aluminium industry, smaller manufacturers contend that affordable access to primary metal is essential for maintaining a competitive edge in global export markets.
Investors in the metal and manufacturing sector should track whether the Ministry of Mines acts on this petition. The central monitorable remains whether any changes to the duty structure are implemented, as this would directly influence the profit margins and raw material security for downstream aluminium companies. Conversely, any reduction in duties could impact the pricing power and profitability of large, vertically integrated primary aluminium producers who currently benefit from the protective tariff structure.