Mines ministry recommends scrapping aluminium scrap import duty

The Ministry of Mines has urged the Department of Revenue to remove the 2.5 per cent basic customs duty on aluminium scrap, citing lower costs for recyclers and stronger domestic value addition

The Ministry of Mines has recommended to the Department of Revenue under the finance ministry the removal of the existing 2.5 per cent basic customs duty (BCD) on aluminium waste and scrap. The suggestion comes at a time when primary aluminium producers have sought to retain the levy and tighten quality norms for imported scrap.

 

In response to queries from Business Standard, the ministry confirmed that it has recommended to the Department of Revenue that "the existing 2.5 per cent BCD on aluminium waste and scrap be eliminated".

 

In representations made to the Ministry of Mines, the Aluminium Association of India (AAI) -- whose members include primary producers such as Vedanta, Hindalco and NALCO -- recently argued that India faces growing import pressures from Russia and Association of Southeast Asian Nations (Asean) countries, risks becoming a dumping ground for low-quality aluminium scrap, and that rising imports of aluminium scrap "threaten over Rs 3 lakh crore of planned investments by leading producers". It said the existing duty should be retained until quality standards are implemented.

   

However, another industry association, the Material Recycling Association of India (MRAI), in its representations argued that retaining the 2.5 per cent duty amounts to "double protection" for primary producers, who already enjoy tariff protection through a 7.5 per cent basic customs duty on imports of primary metal, shielding domestic producers from international competition.

 

"Several countries (US, UAE, Saudi Arabia) are restricting aluminium scrap exports, which may tighten global supplies and increase import costs. Removal of the 2.5 per cent BCD will reduce procurement costs for Indian secondary aluminium producers and support domestic value addition," the Ministry of Mines said, explaining its rationale for proposing the duty removal.

 

The ministry also cited the European Union's Waste Shipment Regulation, under which the EU will notify eligible non-OECD countries for scrap exports by November 2026. "Removal of BCD would signal that aluminium scrap is a strategic industrial raw material for the country and may facilitate continued access to EU scrap supplies," the ministry said.

 

The ministry noted that the secondary aluminium industry meets 80-85 per cent of its raw material requirement through imported scrap and that removal of the 2.5 per cent BCD will reduce the cost of scrap imports. It further observed that with aluminium demand projected at 8.4-8.7 million tonnes by FY30 and primary capacity additions requiring time, eliminating the duty will strengthen secondary production to meet growing domestic demand.

 

The ministry also argued that duty removal will improve the competitiveness of domestic secondary aluminium producers, including micro, small and medium enterprises (MSMEs). It pointed out that aluminium scrap currently attracts a 2.5 per cent BCD, while other non-ferrous metal scrap, such as copper, zinc and lead, is imported at zero duty. "This duty disparity creates cost disadvantage for secondary aluminium industry," the ministry said.

 

It further said that, in general, domestic recyclers pay 2.5 per cent BCD on aluminium scrap. However, finished aluminium products enter India at zero duty under certain free trade agreements (FTAs), including the India-Asean FTA, resulting in an "inverted duty structure". "Removal of duty would help correct this," the ministry said.

 

The recommendation follows deliberations of a Joint Working Group constituted by the Ministry of Mines, comprising representatives of the primary aluminium industry, secondary aluminium manufacturers and recyclers. "Based on the deliberations of the Group, it was broadly agreed that removal of the existing 2.5 per cent BCD on aluminium scrap may be considered in the larger national interest," the ministry said.

 

The ministry also directly addressed objections raised by primary aluminium producers regarding the potential import of sub-standard material following duty elimination on aluminium scrap. "The JWG observed that the quality of imported scrap and the applicable customs duty are two separate issues. Quality-related concerns may be addressed through appropriate standards and classification," it said.

 

The ministry further pointed to IS 2066 (Part 1): 2024 - Coding and Classification for Non-Ferrous Scrap Metals and Residues: Part 1 Aluminium Scrap, published by the Bureau of Indian Standards in November 2024. It said the standard provides a uniform framework for the identification and classification of aluminium scrap and is broadly aligned with internationally accepted scrap classifications. The ministry said the standard is expected to improve the quality of aluminium scrap, reduce ambiguity in grade descriptions, improve transparency in trade and facilitate procurement of scrap for different metallurgical applications in the secondary aluminium ecosystem.

 

"The primary and secondary aluminium producers are not in direct competition but they perform complementary roles within an integrated aluminium value chain. Primary aluminium is largely utilised in sectors requiring high purity and superior electrical conductivity, such as power and electrical equipment, whereas the secondary aluminium industry supplies materials for automotive, construction and engineering applications," the ministry said.

 

The ministry also observed that India has already been importing substantial quantities of aluminium scrap, with imports increasing from 1.8 million tonnes in FY25 to around 2 million tonnes in FY26, reflecting the secondary industry's continued dependence on imported raw material. "Therefore, elimination of BCD is unlikely to result in any unwarranted import surge of low-quality scrap but rather ensure availability to secondary producers. Thus, removal of the 2.5 per cent BCD on aluminium scrap may not adversely affect primary producers, as the primary and secondary aluminium industries cater to distinct end-use segments of the economy," the ministry said.

 

"These products are extensively used by leading companies across the automotive, engineering, steel and packaging sectors, including Tata Motors, Maruti Suzuki, Honda, TVS Motor, Tata Steel and JSW Steel. Their continued reliance on aluminium products manufactured from recycled scrap is the strongest testimony to the quality, consistency and reliability of India's aluminium recycling industry," said Sanjay Mehta, president, MRAI, welcoming the ministry's proposal to eliminate the BCD on imported aluminium scrap.

 

AAI did not respond to queries till press time.