Downstream aluminium industry seeks duty relief to boost competitiveness

Downstream aluminium manufacturers have urged the Centre to reduce customs duty on primary aluminium and scrap, saying high input costs are hurting MSMEs' competitiveness and squeezing margins

Downstream aluminium manufacturers have urged the Centre to cut customs duty on both primary aluminium and aluminium scrap, stating that the current tax structure has put micro, small and medium-sized enterprises (MSMEs) under severe cost pressure and eroded their competitiveness.

The move comes at a time when MSME manufacturers in the aluminium value chain are facing pressure from higher global metal prices, freight costs and energy volatility.

Any duty cut, if rolled out, could ease input costs for downstream industries, improve capacity utilisation and support exports. However, it may draw resistance from primary producers like Hindalco Industries Ltd and Vedanta Aluminium Ltd who benefit from the current import-parity pricing environment.

 

In a joint representation to the mines ministry recently, the Aluminium Secondary Manufacturers Association (ASMA), along with the Cables and Conductors Manufacturers Association of India (CACMAI) and the Federation of All India Aluminium Utensils Manufacturers (FAIAUM), said the effective import duty of 8.25 per cent on primary aluminium and 2.75 per cent on scrap has resulted in domestic producers pricing metal at import parity, squeezing downstream units.

The associations said India's per capita aluminium consumption at 2.5 kg remains well below the global average of 11 kg, but the bigger concern is the sharp rise in input costs. They claimed margins of downstream MSMEs have compressed by as much as 70 per cent over recent years, while input costs have risen 20-35 per cent in the last three months alone.

The duty structure is creating an inverted playing field, as finished aluminium products enter under preferential free trade agreement concessions at near-zero duty, while primary aluminium attracts higher import duty, they said. This, they said, is hurting sectors such as cables, conductors, transmission, energy storage, extrusions, foundries and recycling.

The associations also flagged the European Union's Carbon Border Adjustment Mechanism, saying it could further affect the competitiveness of Indian aluminium exporters.

They said the mines ministry's vision document calls for higher value addition from domestically produced alumina, and stated that this objective can be supported only if primary aluminium is priced appropriately for downstream users.

The industry bodies have sought a reduction in basic customs duty on primary aluminium and scrap, and said they are willing to present their case in person before the ministry.