A mines ministry joint working group has built consensus on removing 2.5 percent import duty on aluminium scrap and is likely to recommend the change to the finance ministry this month for a final call, sources said.
The proposal aims to address concerns that the duty has made domestic manufacturers less competitive at a time when finished aluminium products from free trade agreement partners such as ASEAN enter India at lower or zero duties.
The inverted duty problem
Downstream manufacturers — recyclers, rolling mills and makers of utensils and auto components — import scrap and pay duty on it, yet compete with finished aluminium products.
“Auto component manufacturers and others who use aluminium scrap pay duty on raw material and still have to compete with finished imports that pay nothing,” a source aware of the discussions told Moneycontrol.
The inverted duty structure is hurting domestic value addition. Downstream industries procure material both from domestic primary producers and through imports. Though imports of primary aluminium remain insignificant, scrap shipments form the bulk of overseas sourcing.
According to sources, the ministry backs removing the duty, partly because aluminium is the only non-ferrous metal subject to the levy.
The recommendation could go to the finance ministry this month or next, depending on internal approvals.
The push for duty relief comes as global aluminium prices have risen sharply. On the London Metal Exchange, aluminium climbed from around $2,300-2,600 a tonne in 2024 to over $3,800 a tonne by mid-2026, a jump of roughly 30-35 percent, driven largely by supply disruptions linked to the West Asia conflict and output issues at key smelters.
In recent weeks, prices have moderated but remain well above 2024 levels. Aluminium scrap prices have moved in tandem, rising 20-25 percent, driven by both firmer aluminium benchmark and tighter supply.
Supply squeeze
India imports 1.6-1.8 million tonnes of aluminium scrap a year, mainly from Europe, the US and the UK.
The figure is expected to rise to 1.9-2 million tonnes this fiscal as demand for recycled, low-carbon aluminium grows globally amid a broader push for sustainability and decarbonisation, the source quoted above said.
But sourcing could get harder, with several countries — including in Europe — increasingly retaining scrap for domestic recycling rather than exporting it, the source said.
With India’s per-capita aluminium consumption at around 2.5 kg — against a global average of about 11 kg. The country is unlikely to generate enough scrap domestically to meet industry needs for at least another decade, or possibly longer, while consumption is expected to rise, the source said.
Better scrap
Some primary aluminium producers have pushed back, seeking stricter quality standards on imported scrap before any duty cut is approved.
But scrap — collected from end-of-life products across multiple sources — is mixed in composition, making rigid product standards impractical.
“Classification norms for imported scrap already exist. Additional standards at this stage are unnecessary,” the person said, adding the issue of quality standards is likely to be treated separately from the customs duty decision.
