EXCLUSIVE: SIAM Seeks Removal of 2.5% Import Duty on Aluminium Scrap

The Society of Indian Automobile Manufacturers (SIAM) has asked the government to remove the 2.5% Basic Customs Duty (BCD) on aluminium scrap, stating the levy adds to raw-material costs at a time when access to recycled metal is turning critical and global supplies are tightening.

In a letter to the Finance Ministry dated 14 July 2026, reviewed by Autocar Professional, SIAM said aluminium has become essential to the industry's shift toward lighter, more fuel-efficient and electric vehicles. Lightweight aluminium now accounts for nearly 20% of four-wheelers and about 15% of two-wheelers, largely in engine blocks and other performance components.

The stakes extend well beyond automakers. The sector consumes 60-65% of India's secondary aluminium, which in turn makes up around 40% of the country's total aluminium supply, or about 2.2 million tonnes annually. Scrap is the feedstock for this secondary aluminium, used across cast components, engine parts and structural applications. It also costs 10-20% less than primary aluminium and carries a smaller carbon footprint, making it an increasingly attractive input as manufacturers look to control costs.

Supply Pressures

Domestic scrap collection remains scattered and covers only about 15% of industry needs, leaving manufacturers depending on imports for the rest. That dependence turned riskier after the West Asia conflict hit buying. Aluminium prices rose 27% to $3,370 per tonne in the months following the flare-up, Autocar Professional reported in April, as the conflict shook metal markets more widely. The region supplied roughly 20% of India's scrap needs, or about 4 lakh tonnes, in 2025-26 alone.

The UAE, a major supplier at 1.76 lakh tonnes in FY2025, has since imposed a temporary export restriction on steel, copper and aluminium scrap running from 10 June to 8 October 2026, part of a broader move to retain recyclable material domestically.

Europe adds another layer of risk. The EU's revised Waste Shipments Regulation, in force since 20 May 2024, restricts non-hazardous waste exports to non-OECD (Organisation for Economic Co-operation and Development) countries absent specific authorisation, with additional measures aimed squarely at aluminium scrap. India imported 3.66 lakh tonnes from the EU in 2025, nearly a quarter of its aluminium scrap supply, and has applied for continued access. The EU's first list of authorised recipient countries is due by 21 November 2026.

Duty Impact on the Industry

Against this backdrop, SIAM claims that the 2.5% duty adds directly to landed costs, a burden felt most by MSME component makers, who form the bulk of the auto supply chain. Those higher costs flow through to components and finished vehicles, denting competitiveness in both domestic and export markets, particularly since ASEAN countries, Japan and South Korea all allow duty-free scrap imports.

SIAM also points to an inverted duty anomaly, in which semi-finished aluminium from ASEAN enters India duty-free under free-trade agreements while the raw scrap needed to make the same products domestically attracts a 2.5% levy, undercutting the government's own Make in India push.

There is also a decarbonisation argument behind the request. Recycling aluminium uses about 95% less energy than primary production, roughly 14,000 kWh saved per tonne, and cuts carbon emissions by around 90%, according to SIAM. As automakers work toward India's climate targets and mounting ESG expectations, using more recycled aluminium is becoming less a cost choice and more a necessity.

The wider aluminium industry, though, remains split. Some players back removing the duty to ease costs and improve access to scrap, while others want quality standards and safeguards against low-grade imports in place first. The Mines Ministry has already recommended scrapping the 2.5% BCD, and the decision now rests with the Finance Ministry.