Citing the rising import dependence to meet domestic consumption, the domestic aluminium industry has sought policy steps to “safeguard” the domestic market and create a conducive situation for fresh investments.
Over 55% of the domestic consumption was met via imports in FY24, while domestic capacity creation is at a low ebb.
Industry bodies namely the Aluminium Association of India (AAI) and the Federation of Indian Mineral Industries (FIMI) have recommended protective import tariffs and rationalision of the duty structure on critical raw materials in their pre-Budget notes sent to the financial ministry.
Aluminium is crucial in defence production, infrastructure, electric vehicles (EVs), and renewable energy (RE) sectors. However, the domestic market has come under strain from an influx of low-quality aluminium scrap and surplus primary aluminium imports, primarily from China, which threaten local production and investment viability, the industry bodies contend.
AAI has recommended increaseg in import duties on primary and downstream aluminium products from 7.5% to 10% and a uniform duty of 7.5% on aluminium scrap to curb the inflow of substandard scrap, boost domestic recycling, and protect local producers.
FIMI proposed a hike in primary and downstream aluminium duties to 12.5% while aligning scrap duties to at least 7.5%.
Major producers of aluminium in the country include Vedanta, Hindalco, Jindal Aluminium and public-sector Nalco.
Sumit Jhunjhunwala, assistant vice president at ICRA noted, “Global aluminium consumption is expected to grow at a subdued pace of 2% in CY2024, reflecting significant weakness in the European and North American markets. In this challenging external environment, the health of the domestic aluminium industry in FY25 and FY26 will largely depend on the growth of infrastructure investments, its primary end-use sector.”
He said any budgetary measures aimed at boosting demand for greener technologies, such as EVs and RE sectors, would positively impact aluminium demand. “Additionally, increased budgetary allocations to enhance logistics infrastructure in mineral-rich regions could help address bottlenecks in raw material transportation, such as coal and bauxite, thereby supporting the cost structure of industry players.”
Adding to the woes are high energy costs driven by the GST compensation cess of Rs 400 per metric tonne of coal. Industry stakeholders want the cess to be removed or allow it as an offset against green compliance costs. Cheaper energy will reduce operational expenses and incentivize the adoption of sustainable practices.
India has vast natural resources, ranking seventh in bauxite and fifth in coal reserves globally, both of which are key to aluminium production. Yet, despite its resource advantage, per capita aluminium consumption in India remains a modest 3 kg, far below the global average of 12 kg.
“Domestic demand is projected to reach 10 million tonnes per annum (MTPA) by 2030, requiring significant investments in capacity expansion. While the sector has already committed Rs 1.5 lakh crore to achieve a capacity of 4.2 MTPA, an additional Rs three lakh crore will be needed over the next six years to meet future demand,” AAI said.
Such investments are critical not only for economic growth but also for job creation. The aluminium sector currently provides over 800,000 jobs and supports more than 4,000 small and medium enterprises (SMEs), many in rural and semi-urban areas. A renewed investment push could generate up to two million additional jobs, aligning with Prime Minister Narendra Modi’s vision of a “Viksit Bharat,” the industry body said.
Industry players said without regulatory support, the industry risks losing its competitive edge to global players, particularly those from subsidised economies.