Hot aluminium bar exits a press in an Indian factory
India’s downstream aluminium industry is sounding the alarm, urging the government to slash customs duties on primary aluminium and scrap. The sector, dominated by micro, small, and medium-sized enterprises (MSMEs), warns that soaring input costs and an inverted duty structure are crippling their competitiveness and squeezing profit margins, threatening a vital segment of the nation’s manufacturing.
At the heart of the issue are the high input costs for downstream manufacturers, driven by volatile global metal prices, freight charges, and energy expenses. Industry associations argue that the existing customs duty framework allows domestic primary aluminium producers to price their products at ‘import parity,’ effectively negating any advantage for local downstream players and making raw materials expensive. This situation is compounded by an ‘inverted duty structure,’ where finished aluminium products can enter India with minimal import duties, while the raw materials for domestic production face higher tariffs. This creates an unfair playing field, making it harder for Indian manufacturers to compete against imported finished goods.
The plea for duty relief isn’t just about immediate profits; it’s a strategic move to address fundamental challenges in India’s industrial landscape. The country’s per capita aluminium consumption remains notably low compared to global averages, indicating significant untapped growth potential. By making raw materials more accessible and affordable, the government could stimulate domestic manufacturing, encourage innovation, and ultimately boost overall aluminium consumption within the economy.
Furthermore, the industry is keenly aware of international pressures, particularly the European Union’s impending Carbon Border Adjustment Mechanism (CBAM). This mechanism, designed to level the playing field for carbon-intensive imports, could significantly impact Indian aluminium exporters if their production processes aren’t cost-competitive and carbon-efficient. Reducing input costs now could provide crucial breathing room for these businesses to adapt and remain viable in key export markets.
The government now faces a critical decision: maintain the current duty structure, which benefits primary producers but strains downstream MSMEs, or intervene to reduce duties, potentially boosting competitiveness and consumption. The outcome will not only shape the future of India’s aluminium sector but also influence its broader manufacturing ambitions and its ability to navigate evolving global trade policies like the EU’s CBAM.
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