The aluminium industry has called on the government to increase import duties on primary and downstream aluminium, as well as customs duties on aluminium scrap, to limit the influx of low-quality scrap. In FY24, over 55% of domestic consumption was met through imports, as local capacity expansion remained sluggish.
The Aluminium Association of India (AAI) has proposed raising import duties on primary and downstream aluminium products from 7.5% to 10% and implementing a uniform 7.5% duty on aluminium scrap to limit substandard imports, promote domestic recycling, and safeguard local manufacturers.
Amid rising import dependence to meet domestic demand, the Indian aluminium industry has called for policy interventions to “safeguard” the local market and create a more favorable environment for new investments. In FY24, over 55% of domestic consumption was met through imports, while domestic production capacity remains limited.
Industry associations, including the Aluminium Association of India (AAI) and the Federation of Indian Mineral Industries (FIMI), have submitted recommendations in their pre-Budget proposals to the Ministry of Finance. These suggestions include protective import tariffs and adjustments to the duty structure on essential raw materials.
The AAI has urged an increase in import duties on both primary and downstream aluminium products from 7.5% to 10%. Additionally, AAI advocates for a uniform 7.5% duty on aluminium scrap to reduce the influx of substandard material, promote domestic recycling, and support local manufacturers. FIMI, on the other hand, has recommended raising the duties on primary and downstream aluminium products to 12.5%, while also aligning the scrap duty to at least 7.5%.
Aluminium is essential for various sectors such as defence production, infrastructure, electric vehicles (EVs), and renewable energy (RE). However, industry bodies highlight that the domestic market is under pressure due to the influx of low-quality aluminium scrap and excess primary aluminium imports, particularly from China, which jeopardize local production and investment prospects.
Challenges faced by the Indian Aluminium Industry
The aluminium market in India is primarily driven by rapid urbanization and ongoing infrastructure development. As cities grow and urban populations rise, there is a growing demand for aluminium in construction and infrastructure projects. Aluminium’s lightweight, corrosion-resistant, and versatile properties make it an ideal material for applications such as architectural facades, window frames, roofing systems, and structural components in buildings, bridges, and transportation networks.
According to a report ‘India Aluminium Market’, by TechSci Research LLC, the aluminium market in India was valued at US$ 13.77 billion in 2024 and is expected to experience strong growth, with a projected CAGR of 6.27% during the period 2025-2030.
However, the domestic aluminium industry faces certain challenges.
- Environmental and regulatory constraints
This is one of the major challenges – aluminium production is energy-intensive and generates considerable greenhouse gas emissions, prompting increased scrutiny and stricter regulations. The process involves extracting bauxite, refining it into alumina, and smelting it into aluminium, all of which have negative environmental impacts, such as deforestation, air and water pollution, and high energy consumption. To address these concerns, the Indian government has implemented tighter emission standards and sustainable mining practices, requiring companies to invest in cleaner technologies and pollution control measures, which raises production costs.
Another key challenge is the management of red mud, a highly alkaline by-product of alumina refining. Improper disposal poses serious environmental risks, and finding sustainable solutions for its recycling or disposal requires significant investment in research and development.
Additionally, aluminium smelting’s high energy requirements make access to reliable, affordable power crucial. However, India’s power sector faces issues such as supply shortages, high tariffs, and inconsistent electricity quality, which can increase costs and affect the industry’s competitiveness.
High energy costs are further exacerbated by the GST compensation cess of Rs 400 per metric tonne of coal. Industry stakeholders are advocating for the removal of this cess or for it to be offset against green compliance costs. Reducing energy costs would lower operational expenses and promote the adoption of sustainable practices.
Furthermore, the industry faces challenges related to high production costs and intense competition. Several factors drive these costs, including raw material prices, energy costs, and technological inefficiencies. While India has abundant bauxite reserves, its extraction and refining processes are capital-intensive, and the quality of bauxite often requires additional processing, increasing costs. Global commodity price volatility further complicates the cost structure for producers, affecting profit margins. (India possesses vast natural resources, ranking seventh in bauxite and fifth in coal reserves globally.)
Energy costs are a major concern, as aluminium smelting is highly energy-intensive. The high electricity tariffs, supply inconsistencies, and dependence on expensive imported coal contribute to elevated energy costs, making it harder for producers to remain competitive globally.
Additionally, many aluminium plants in the country use outdated technologies, which are less efficient and more costly than modern facilities abroad. Upgrading these plants requires significant capital investment, posing a barrier for many companies.
- Competitive pressures from international producers
Competitive pressure, particularly from China, exacerbates the situation. China benefits from economies of scale, government subsidies, and cheaper raw materials and energy, making it difficult for Indian producers to compete on price. Imported aluminium products, often cheaper due to lower production costs, further intensify the competition.
- Infrastructure and logistical challenges
These present significant hurdles for the aluminium market, impacting both production efficiency and distribution costs. The transportation network, including roads, ports, and railways, in the country is often inadequate, leading to delays and higher costs in moving raw materials like bauxite and alumina, as well as finished aluminium products, impacting the competitiveness of Indian aluminium producers in both domestic and global markets.
Moreover, many aluminium production facilities in the country are located in remote areas, closer to bauxite mines but far from industrial centers, requiring long-distance transportation, which increases costs and logistical complexities. The storage infrastructure for aluminium products is also underdeveloped, with inadequate facilities to protect the material from environmental factors, leading to potential product damage and financial losses.
- Major producers
Major producers of aluminium in the country include Vedanta, Hindalco, Jindal Aluminium and public-sector Nalco. The industry players have cautioned that without regulatory support, the sector may lose its competitive edge to global players, especially those from subsidized economies.
Future perspective
The per capita aluminium consumption in India, currently stands at just 3 kg, well below the global average of 12 kg. However, according to the Aluminium Association of India (AAI), the domestic demand is expected to reach 10 million tonnes per annum (MTPA) by 2030, which will require significant investments in expanding capacity. While the sector has already pledged Rs 1.5 lakh crore to achieve a capacity of 4.2 MTPA, an additional Rs 3 lakh crore will be needed over the next six years to meet the anticipated demand.
According to Sumit Jhunjhunwala, Assistant Vice President at ICRA, “Global aluminium consumption is expected to grow at a subdued pace of 2% in FY’24, reflecting significant weakness in the European and North American markets. In this challenging external environment, the health of the domestic aluminium industry in FY’25 and FY’26 will largely depend on the growth of infrastructure investments, its primary end-use sector.”
He further noted that budgetary measures designed to boost demand for greener technologies, such as electric vehicles (EVs) and renewable energy sectors, would positively influence aluminium demand. Additionally, increased funding to improve logistics infrastructure in mineral-rich areas could help resolve transportation bottlenecks for raw materials like coal and bauxite, thereby supporting the cost structure of industry players.
