The Material Recycling Association of India has urged the government to abolish the 2.5% customs duty on aluminium scrap. This move aims to lower costs for domestic recyclers who rely on imports for 80-85% of their raw material needs. The outcome could significantly impact profitability for secondary aluminium producers and MSMEs across the country.
The Material Recycling Association of India (MRAI) has submitted a formal request to the government, advocating for the removal of the 2.5% basic customs duty currently imposed on aluminium scrap imports. The industry body argues that this duty places a financial burden on domestic manufacturers and recyclers, who face higher input costs compared to their international peers.
India is heavily dependent on overseas markets for its aluminium scrap, sourcing approximately 80-85% of its requirements through imports. This reliance makes the cost of raw materials a critical factor for the secondary aluminium industry, which involves melting and processing scrap into usable metal rather than producing it from primary bauxite ore. Industry data indicates that secondary aluminium production has expanded from 0.85 million tonnes in FY16 to an estimated 2.2 million tonnes by FY26, representing about 35% of India's total aluminium consumption.
Representatives from the recycling sector highlight that while copper, lead, and zinc scrap already enjoy duty-free status in India, aluminium remains subject to the 2.5% levy. MRAI President Sanjay Mehta noted that this creates a competitive disadvantage for Indian MSMEs compared to manufacturers in countries like Japan, South Korea, Thailand, Malaysia, and Indonesia, which do not impose such import duties. By removing this barrier, the industry believes it could improve the global competitiveness of domestic manufacturing and support the growth of the circular economy.
The secondary aluminium sector is a significant contributor to employment, supporting approximately seven lakh jobs. Advocates for the duty removal argue that lower input costs would provide better margins for smaller enterprises, allowing them to scale operations and improve processing efficiency.
For investors, the potential removal of this duty could have mixed implications depending on the company's business model. Secondary aluminium recyclers and downstream manufacturers that rely heavily on imported scrap may see improved profit margins if the duty is abolished, as it directly lowers their raw material expenditure. Conversely, primary aluminium producers, who rely on domestic bauxite mining and refining, often maintain a different cost structure. Any policy shift that makes imported scrap significantly cheaper could influence the pricing dynamics of aluminium products in the domestic market.
The primary monitorable for the industry remains the government's stance on this proposal. Investors and market participants will likely track future budget announcements or official notifications from the Ministry of Finance to see if the duty is adjusted. Additionally, the broader trends in global aluminium scrap pricing and the capacity utilisation rates of secondary producers will continue to influence the sector's financial performance.