Indian recyclers seek end to 2.5% aluminium scrap import duty as global supply tightens

INDIA – The Material Recycling Association of India has petitioned the Prime Minister’s Office to remove the 2.5 percent basic customs duty on aluminium scrap, as small and mid-sized recyclers face cost inflation and a tightening global supply crunch following EU export restrictions and Middle East geopolitical tensions.

India’s secondary aluminium sector contributes nearly 40 percent of the country’s total aluminium supply of approximately 2.2 million tonnes annually, yet depends on imports for about 85 percent of its scrap requirements. 

MSMEs depend on high-quality imported scrap to meet technical specifications, but the existing duty raises input costs and strains working capital, limiting access to reliable recycled material.

The Supply Crunch Explained

India sources a considerable share of its aluminium scrap from the European Union, the United States, and the Middle East. 

However, supply has tightened due to export restrictions implemented by the EU and disruptions from geopolitical tensions in the Middle East. 

India’s leading primary aluminium producers, Vedanta, Hindalco Industries, and National Aluminium Company, have previously raised concerns over rising scrap imports, but recyclers argue that imported scrap remains essential due to limited domestic availability.

According to commodities consultancy BigMint, with aluminium consumption expected to reach 8.5 to 9.0 million metric tons by fiscal year 2030 and recycled content mandates coming in, imports are likely to remain crucial unless domestic scrap collection and urban mining improve significantly.

The Decarbonisation Argument

Recycling aluminium consumes nearly 95 percent less energy compared to primary production from bauxite, making it a major component of sustainable manufacturing. 

As Indian brand owners face pressure to increase recycled content in packaging, automotive, and construction sectors, access to affordable scrap becomes a strategic input.

Removing the duty could ease cost pressures and improve competitiveness, reinforcing downstream manufacturing without leaving any negative impact on primary producers, according to MRAI.

The MSME Challenge

Small and mid-sized enterprises (MSMEs) that dominate India’s secondary aluminium sector are particularly vulnerable to duty-driven cost increases. 

Unlike large integrated producers, they cannot absorb margin compression or negotiate volume discounts on imported scrap. 

For these recyclers, the 2.5 percent duty is not a trade barrier, it is a survival threshold.

When Scrap Becomes Strategic

India needs recycled aluminium to meet its decarbonisation targets. But 85 percent of that scrap comes from abroad, and every tonne carries a 2.5 percent tax. MRAI is asking for that tax to go. 

The answer will determine whether Indian recyclers can compete, or whether the scrap will flow to other markets instead.

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