Indian recyclers seek removal of import tax on aluminium scrap, letter shows

NEW DELHI: A leading industry group representing small and mid-sized firms that recycle metals, plastics, e-waste, rubber and glass has sought intervention from the Prime Minister's Office (PMO) to remove an import tax on aluminium scrap, citing rising costs and strong demand, according to a letter reviewed by Reuters.

India, a major global buyer of aluminium scrap, imposes a 2.5% tariff on the ‌product and relies ⁠heavily ⁠on supplies from the European Union, the U.S. and the Middle East.

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The EU's planned export curbs and disruptions from the U.S.-Israeli war on Iran have tightened supplies, industry officials said.

Aluminium scrap is used mainly by the auto sector as well as in construction, foils and cables.

"MSMEs (Micro, Small and Medium Enterprises) depend on high-quality imported scrap to meet technical specifications, but the 2.5% basic customs duty raises input costs and strains working capital, limiting ⁠access to ‌reliable recycled material," the Material Recycling Association of India (MRAI) said in a March 26 letter to the PMO.

The PMO and the MRAI did not ⁠respond to Reuters requests for comment.

Scrapping of import tariff would reduce costs and improve competitiveness, the letter said.

The secondary sector that relies on scrap contributes nearly 40% of India's total aluminium supply of around 2.2 million metric tons per year and it meets 85% of its scrap needs through imports, the letter said.

In a report released last year, the mines ministry said India's high dependence on imported scrap could be attributed to the low availability of domestic ‌scrap.

The ministry also said high scrap imports posed a problem for primary producers of aluminium given a surge in shipments in recent years.

However, the MRAI said in its letter that ⁠removing the import tariff would promote downstream manufacturing without adversely impacting primary producers.

India's leading primary aluminium producers include Vedanta , Hindalco Industries and state-owned National Aluminium. Besides being a resource for domestic producers, scrap has a vital role in the sector's decarbonisation efforts, since recycling aluminium uses 95% less energy than producing metal from mined bauxite.

"With aluminium consumption expected to reach 8.5-9.0 million metric tons by FY30 and recycled content mandates coming in, imports are likely to remain crucial unless domestic scrap collection and urban mining improve significantly," commodities consultancy BigMint said.