SIAM Aluminium Scrap Duty Removal Sought as Costs Rise

SIAM Seeks Removal of Aluminium Scrap Duty

The Society of Indian Automobile Manufacturers (SIAM) has urged the government to remove the 2.5% Basic Customs Duty (BCD) on aluminium scrap, arguing that the levy is increasing raw-material costs as recycled metal becomes increasingly important and global supplies tighten. In a letter to the Finance Ministry dated 14 July 2026, SIAM said aluminium is essential to the automotive industry's transition toward lighter, more fuel-efficient and electric vehicles. Lightweight aluminium now represents nearly 20% of four-wheelers and about 15% of two-wheelers, mainly through engine blocks and other performance-related components. SIAM says removing the duty would ease cost pressure across the automotive supply chain.

Aluminium Scrap Has Become a Critical Automotive Input

The importance of scrap extends beyond vehicle manufacturers because the automotive sector consumes around 60-65% of India's secondary aluminium. Secondary aluminium represents approximately 40% of the country's total aluminium supply, equivalent to about 2.2 million tonnes annually. Scrap is the primary feedstock for this recycled aluminium and is widely used in cast components, engine parts and structural applications. Compared with primary aluminium, recycled material costs around 10-20% less and has a substantially lower carbon footprint. These characteristics are becoming increasingly significant for manufacturers attempting to manage production costs while also improving material efficiency and meeting environmental expectations. SIAM therefore views reliable access to aluminium scrap as an important competitiveness and sustainability issue for the automotive industry.

Supply Constraints Increase Import Dependence

India's domestic scrap collection remains fragmented and currently meets only about 15% of industry requirements, leaving manufacturers dependent on imports for the majority of their needs. This exposure has become more significant following disruptions associated with the West Asia conflict. Aluminium prices increased 27% to $3,370 per tonne in the months after the flare-up, according to the April report, as broader metal markets reacted to the conflict. The region had supplied roughly 20% of India's aluminium scrap requirements, equivalent to about 4 lakh tonnes, during 2025-26. The combination of limited domestic collection, import dependence and higher international prices has increased the industry's vulnerability to external supply disruptions.

United Arab Emirates Export Restriction Adds Pressure

The United Arab Emirates has become another source of uncertainty for Indian aluminium scrap buyers. The country, which supplied 1.76 lakh tonnes of aluminium scrap to India in FY2025, imposed a temporary export restriction covering steel, copper and aluminium scrap from 10 June to 8 October 2026. The measure forms part of a wider effort to retain recyclable materials within the domestic market. For India, the restriction adds pressure to an already constrained supply chain because imports play a major role in meeting automotive industry's demand for secondary aluminium feedstock. The development also highlights how policy decisions in major supplier markets can quickly affect the availability and cost of recycled materials for Indian manufacturers.

European Scrap Rules Create Another Supply Risk

Europe presents an additional challenge for India's aluminium scrap supply. The European Union's revised Waste Shipments Regulation, which has been in force since 20 May 2024, restricts exports of non-hazardous waste to non-OECD countries without specific authorisation and introduces additional measures affecting aluminium scrap. India imported 3.66 lakh tonnes of aluminium scrap from the European Union in 2025, representing nearly one-quarter of its supply, and has applied for continued access. The European Union is expected to publish its first list of authorised recipient countries by 21 November 2026. Any restriction on continued access could further tighten India's supply position and increase the importance of developing domestic collection and recycling capabilities.

2.5% Duty Raises Automotive Supply Chain Costs

SIAM argues that the 2.5% BCD directly increases the landed cost of aluminium scrap, with the impact particularly significant for MSME component manufacturers that make up a large part of India's automotive supply chain. Higher input costs can ultimately flow into component prices and finished vehicles, potentially weakening the competitiveness of Indian manufacturers in domestic and export markets. SIAM notes that ASEAN countries, Japan and South Korea permit duty-free imports of aluminium scrap, creating a potential cost disadvantage for Indian companies. The association therefore believes removing the levy would provide manufacturers with more competitive access to an important raw material while reducing cost pressure on suppliers that operate with comparatively limited financial flexibility.

Inverted Duty Structure Raises Make in India Concerns

SIAM has also highlighted what it considers an inverted duty anomaly in the aluminium supply chain. Under existing free-trade arrangements, semi-finished aluminium products from ASEAN can enter India without customs duty, while the aluminium scrap required to manufacture similar products domestically attracts a 2.5% levy. According to SIAM, this structure can make imported semi-finished products more competitive than locally processed material, despite government efforts to strengthen domestic manufacturing. The association argues that removing the duty on scrap would help correct this imbalance by improving access to recycled feedstock for domestic processors and component manufacturers. The request therefore extends beyond immediate cost relief and is linked to the broader objective of strengthening local value addition and manufacturing competitiveness.

Recycling Supports Decarbonisation Goals

The request also has a significant environmental dimension. SIAM states that recycling aluminium requires about 95% less energy than producing primary aluminium, representing roughly 14,000 kWh of energy savings per tonne. It also reduces carbon emissions by around 90%, making recycled aluminium an important material for manufacturers seeking to reduce the environmental impact of vehicle production. As automakers work toward India's climate objectives and face growing ESG expectations, greater use of recycled aluminium is becoming increasingly relevant. Lower energy consumption and emissions can complement the automotive industry's broader efficiency and electrification efforts. SIAM therefore sees improved access to scrap not only as a cost-reduction measure but also as a way to support the industry's longer-term decarbonisation priorities.

Aluminium Industry Remains Divided

The wider aluminium industry does not have a uniform position on the proposed duty removal. Some industry participants support eliminating the 2.5% BCD because it could reduce raw-material costs and improve access to aluminium scrap. Others favour maintaining quality standards and safeguards to prevent low-grade or unsuitable imported material from entering the domestic market. The debate therefore involves both cost competitiveness and material quality considerations. The Mines Ministry has already recommended scrapping the 2.5% BCD, placing the final decision with the Finance Ministry. The outcome could have implications for automakers, component manufacturers, recyclers and other aluminium users because changes to scrap import policy could influence material availability, input costs and the competitiveness of domestic production.

Implications for India's Automotive Industry

For Society of Indian Automobile Manufacturers, the immediate objective is to reduce the cost burden created by the aluminium scrap duty while improving access to a material that is becoming strategically important. The issue is particularly relevant to India because domestic scrap collection covers only a small share of current requirements, leaving manufacturers exposed to international supply disruptions. Continued restrictions affecting suppliers such as the United Arab Emirates and evolving waste-export rules in the European Union could keep supply risks elevated. A decision to remove the 2.5% BCD could therefore provide short-term cost relief while supporting greater use of recycled aluminium, although quality safeguards and stronger domestic collection would remain important to the industry's longer-term resilience.

Frequently Asked Questions

Why does SIAM want the aluminium scrap duty removed?
SIAM wants the 2.5% Basic Customs Duty on aluminium scrap removed because the levy increases raw-material costs while imported scrap has become increasingly important to India's automotive manufacturing supply chain. Domestic scrap collection currently meets only about 15% of industry requirements, leaving manufacturers dependent on overseas supplies. SIAM also argues that competing markets, including ASEAN countries, Japan and South Korea, allow duty-free scrap imports. Removing the levy could therefore lower landed costs for component manufacturers, improve the competitiveness of Indian automotive production and support greater use of recycled aluminium.

How could aluminium scrap supply affect automakers?
Aluminium scrap supply could affect automakers through both material costs and production security because recycled aluminium is widely used in cast components, engine parts and structural applications. India relies heavily on imports, while disruptions in the West Asia region and export restrictions in major supplier markets have increased supply uncertainty. European Union waste shipment rules could add another constraint if continued access for India is not authorised. Higher scrap prices or reduced availability could raise component costs and weaken competitiveness, while stronger access to recycled aluminium could support cost control, energy savings and lower manufacturing emissions.