- The Association of Automobile Manufacturers (SIAM) has demanded the government to completely remove the 2.5% import duty on aluminum scrap.
- Due to world wars and embargoes leading to scrap shortages, production costs of Indian vehicles have increased significantly.
- If the import duty is not removed, there is a possibility that MSME spare parts manufacturers in the country will face difficulties and the prices of cars will increase.
Society of Indian Automobile Manufacturers (SIAM), the apex body of Indian automobile manufacturers, has demanded the central government to completely remove the 2.5% Basic Customs Duty on aluminum scrap. SIAM says the tariffs are driving up vehicle production costs at a time when global supply of aluminum has been disrupted.
Why aluminum is important for automobile sector?
The use of aluminum has increased rapidly to make vehicles lighter, higher mileage and eco-friendly (electric). At present, about 20% of the total weight of four-wheelers and 15% of two-wheelers, aluminum is used primarily in the engine block and main components. The automobile industry alone consumes 60% to 65% of the total secondary aluminum in the country. Aluminum made from scrap is 10% to 20% cheaper than primary aluminum and produces much lower carbon emissions.
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Global crises have increased supply stress
Of the total scrap consumed in India, only 15% scrap is available locally, while the remaining 85% scrap has to be imported. Aluminum prices rose 27% to $3,370 a tonne due to the bellicose situation in West Asia. India imports 20% of its scrap from this region. UAE has temporarily banned the export of scrap from June 10 to October 8, 2026. The European Union has also imposed strict restrictions on scrap exports to non-OECD countries.
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What is the impact of import duty on the industry??
According to SIAM, MSME spare parts manufacturers are directly affected by the 2.5% import duty. There is no import duty on aluminum scrap in ASEAN countries, Japan and South Korea, making it difficult for Indian companies to compete internationally.
Manufactured aluminum parts from ASEAN countries come to India duty-free, but the raw scrap required for it is taxed at 2.5%. This affects the Make in India policy. Recycling of scrap saves 95% electricity and 90% less carbon emissions. This issue of environmental protection is also important in this. The Ministry of Mines has already recommended the removal of this 2.5% levy, and now the Finance Ministry has to take the final decision.