The Material Recycling Association of India (MRAI) has requested the government to eliminate the 2.5% basic customs duty on imported aluminium scrap. The association states the tariff creates an unfair disadvantage for local MSMEs and hurts the automotive and engineering sectors, which depend on imports for up to 85% of their scrap.
NEW DELHI — The Material Recycling Association of India (MRAI) has formally submitted an appeal to the Prime Minister’s Office (PMO) calling on the central government to abolish the 2.5% basic customs duty (BCD) on imported aluminium scrap. The apex recycling body argues that the existing tariff significantly inflates raw material costs for thousands of micro, small, and medium enterprises (MSMEs) and downstream manufacturers across the country. With India experiencing a domestic metal supply shortage, the industry body states that eliminating this import friction is vital to secure resource safety, safeguard domestic manufacturing, and expand the nation's circular economy.
Escalating Raw Material Costs Amid Structural Supply Gaps
According to the official representation submitted by the MRAI, India’s secondary aluminium industry remains heavily reliant on global supply chains, importing roughly 80% to 85% of its total aluminium scrap requirements to sustain domestic production. This steep import dependency is driven by the country's historically low domestic consumption of aluminium—currently standing at just 3.3 kg per capita compared to a global average of 16 kg. The resulting domestic scrap generation remains insufficient, with industry experts projecting that it could take another 15 to 20 years for India's localized scrap ecosystem to fully mature.
Despite this ongoing raw material deficit, secondary aluminium production in India has experienced rapid expansion over the last decade. Annual output scaled from 0.85 million tonnes in the 2015-16 financial year (FY16) to nearly 2.2 million tonnes in FY26. Recycled metal now fulfills approximately 35% of India’s overall domestic aluminium consumption. The MRAI emphasizes that keeping the 2.5% basic customs duty intact creates an artificial cost barrier that penalizes recyclers who provide critical supply components to major domestic engineering and industrial projects.
Global Competitive Disadvantages and Inverted Duty Structures
The association pointed out a sharp policy disparity between aluminium and other primary non-ferrous scrap categories. Following revisions in previous federal budgets, metal scraps like copper, zinc, and lead were fully exempted from basic customs duties. This leaves aluminium scrap as the singular major base metal scrap category that continues to bear an import duty penalty within India.
Furthermore, the domestic recycling industry faces severe competitive pressure from rival manufacturing centers across Asia. Nearby manufacturing hubs—including Thailand, Malaysia, Indonesia, Japan, and South Korea—allow entirely duty-free imports of aluminium scrap.
The MRAI notes that several of these nations utilize their zero-duty access to import scrap, process it into value-added finished alloys, and subsequently export those final components to India under preferential free-trade agreements at zero duty. This phenomenon triggers an inverted duty structure that leaves Indian recyclers at a direct operational disadvantage, squeezing their margins while favoring foreign processing ecosystems over local MSMEs.
Impact on Industrial Sectors, Employment, and Decarbonization
A final policy reversal would directly influence multiple core industrial sectors. Quality-tested secondary aluminium alloys processed from imported scrap are heavily utilized by downstream sectors including the automotive, construction, power, engineering, and packaging fields. Prominent domestic corporations, such as Tata Motors, Maruti Suzuki, Honda, TVS Motor, Tata Steel, and JSW Steel, rely on these recycled supplies to manufacture lightened components that comply with Bureau of Indian Standards (BIS) and global safety frameworks.
The sector is also a critical engine for localized employment and social mobility, providing livelihood security to nearly seven lakh direct and indirect workers across the country. Notably, women represent approximately 46% of the skilled workforce specialized in the sorting, segregation, and mechanical processing of scrap materials.
From an environmental standpoint, shifting toward recycled aluminium remains key to fulfilling India's carbon-neutral manufacturing pledges. The recycling of scrap requires up to 95% less energy and yields up to 90% fewer greenhouse gas emissions than primary metal extraction. Highlighting its strategic value, think-tank NITI Aayog projects that secondary aluminium must rise to fulfill 45% of total domestic metal demand by 2028 to achieve national decarbonization targets.
Official Sources Section
The industry requirements, operational datasets, and trade policy appeals detailed in this report are sourced from official representations dispatched to the Prime Minister's Office by the Material Recycling Association of India. Supporting policy data and production consensus figures are cross-verified with official meeting minutes released by the Ministry of Mines Joint Working Group and industrial roadmaps issued by NITI Aayog.
Quote Section
"Removing the 2.5 per cent Basic Customs Duty on aluminium scrap will strengthen thousands of MSMEs, generate employment, improve resource security, enhance the competitiveness of downstream manufacturing, and support the circular economy," stated Sanjay Mehta, President of the Material Recycling Association of India (MRAI). "Aluminium scrap should be recognised as a strategic industrial raw material rather than treated as waste."
Why It Matters
Abolishing the 2.5% basic customs duty will directly lower production input costs for thousands of secondary metal refiners and alloy manufacturers throughout India. Lower component costs allow domestic auto-component, hardware, and engineering suppliers to price their final goods more competitively against cheaper imports. Additionally, removing trade barriers ensures uninterrupted raw material security as international markets like the European Union and the United States tighten their internal scrap export controls to safeguard their own green transitions.
Key Facts at a Glance
Import Dependency: India relies heavily on international markets to source 80% to 85% of its total industrial aluminium scrap requirements.
Livelihood Generation: The secondary aluminium processing industry sustains nearly 7,00,000 direct and indirect jobs, with women comprising roughly 46% of the skilled workforce.
Duty Disparity: Aluminium scrap is the only major non-ferrous metal scrap still subjected to a 2.5% basic customs duty, whereas copper, zinc, and lead scrap enjoy zero-duty exemptions.
Consensus Backing: A dedicated Joint Working Group operating under the Ministry of Mines reviewed the issue on June 17, 2026, and officially supported the duty removal in the national interest.
FAQ Section
Why does India need to import aluminium scrap?
India imports 80% to 85% of its scrap requirement because its domestic per capita aluminium consumption is very low (3.3 kg vs. the global average of 16 kg). This leaves a massive domestic shortage of scrap material available for local recycling mills.
Which industries rely on secondary recycled aluminium?
Recycled aluminium alloys are vital raw materials for automotive manufacturing, infrastructure development, defense, packaging, engineering, and steelmaking. Major domestic manufacturers utilize secondary metal to meet international performance standards.
What is the stance of the government ministries on this duty?
During a technical review meeting on June 17, 2026, a Joint Working Group established under the Ministry of Mines agreed that abolishing the 2.5% tariff would benefit the broader manufacturing ecosystem and recommended that the Ministry of Finance evaluate the removal.
Source: Material Recycling Association of India Industry Representation Letters, Ministry of Mines Joint Committee Technical Memorandums, and NITI Aayog National Decarbonization Studies.
