On March 26, 2026, the Material Recycling Association of India (MRAI) — the country's leading industry body representing small and mid-sized recyclers of metals, plastics, e-waste, rubber, and glass — wrote to the Prime Minister's Office (PMO) seeking the removal of the 2.5% basic customs duty on aluminium scrap imports. The letter, first reported by Reuters, highlights the growing tension between India's booming demand for recycled aluminium and the supply constraints that threaten the sector's competitiveness.
For scrap dealers, recyclers, and metal traders operating in India and the Gulf region, this policy debate has direct implications for pricing, trade flows, and business strategy. Here is a comprehensive analysis of what this means and how it could reshape the aluminium scrap market.
The Current Situation: India's Aluminium Scrap Market
India's aluminium industry has grown into a significant global force, with total aluminium supply reaching approximately 2.2 million metric tons per year. What many outside the industry don't realise is that nearly 40% of this supply — roughly 880,000 tonnes — comes from the secondary (recycled) sector rather than primary smelting.
This secondary sector, comprising thousands of small and medium enterprises (SMEs) across India, depends heavily on imported scrap to feed its operations. The numbers are stark:
- 85% of India's aluminium scrap needs are met through imports
- Major source countries include the European Union, United States, and Middle East (particularly UAE and Oman)
- The current 2.5% basic customs duty on imported aluminium scrap adds to input costs for these recyclers
- India's aluminium consumption is projected to reach 8.5-9.0 million metric tons by FY2030 — nearly 4 times current levels
At ScrapRates.in, we track daily aluminium scrap prices across 400+ Indian cities. Current rates range from ₹145-180/kg depending on grade and location, with prices directly influenced by import costs and international commodity movements.
Why MRAI Wants the Duty Removed
The MRAI's letter to the PMO outlines several compelling arguments for removing the 2.5% import duty:
1. Rising Input Costs for MSMEs
The 2.5% duty may seem small in percentage terms, but for capital-intensive recycling operations processing thousands of tonnes monthly, it translates to significant additional costs. A medium-sized recycler processing 500 tonnes of imported aluminium scrap per month faces approximately ₹18-22 lakhs in additional duty costs annually, directly eating into already thin margins.
As MRAI stated in their letter: "MSMEs 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."
2. Global Supply Tightening
The global aluminium scrap market is facing unprecedented supply pressures from multiple directions:
- EU export curbs — The European Union is planning restrictions on scrap metal exports as part of its own circular economy strategy, which would reduce one of India's largest supply sources
- Geopolitical disruptions — Regional conflicts have disrupted shipping routes and supply chains from the Middle East
- Competing demand — China, Southeast Asia, and other emerging markets are competing for the same limited scrap supply
In this environment, every cost advantage matters. Removing the 2.5% duty would make Indian recyclers more competitive in securing global scrap supplies against buyers from countries that impose zero or lower tariffs.
3. Decarbonisation Imperative
Perhaps the strongest argument in MRAI's favour is the environmental one. Recycling aluminium uses 95% less energy than producing primary aluminium from bauxite ore. As India pursues its climate commitments and major manufacturers face pressure to reduce their carbon footprints, recycled aluminium becomes not just economically attractive but environmentally essential.
With recycled content mandates expected in key sectors like automotive and packaging, the demand for quality aluminium scrap will only increase. Making imports cheaper and more accessible supports India's broader sustainability goals.
The Other Side: Primary Producers' Concerns
Not everyone supports duty removal. India's primary aluminium producers — Vedanta, Hindalco Industries, and state-owned National Aluminium (NALCO) — have expressed concerns about a surge in cheap scrap imports undercutting domestic primary production.
The Ministry of Mines has noted that India's high dependence on imported scrap is problematic, and that increasing scrap shipments in recent years have impacted primary producers. Their argument is that India should develop domestic scrap collection infrastructure ("urban mining") rather than relying on imports.
However, MRAI counters that removing the import tariff would "promote downstream manufacturing without adversely impacting primary producers" — arguing that the two sectors serve different market segments and that the real competition is between Indian recyclers and their international counterparts, not between recyclers and primary producers.
Impact on Scrap Prices: What Dealers Should Expect
If the 2.5% duty is removed, here is how it could affect scrap prices across the value chain:
Short-Term Impact (0-6 months)
| Factor | Effect on Prices | Magnitude |
|---|---|---|
| Lower import costs | Downward pressure on domestic prices | 2-4% reduction |
| Increased import volumes | More supply in domestic market | Moderate |
| Buyer sentiment | Expectation of lower prices may delay purchases | Temporary |
Medium-Term Impact (6-18 months)
| Factor | Effect on Prices | Magnitude |
|---|---|---|
| Expanded recycling capacity | More demand for scrap as recyclers scale up | Upward pressure |
| Improved competitiveness | More Indian recyclers enter export markets | Stabilising |
| Quality upgrade | Better access to high-grade imported scrap | Premium grades increase |
Long-Term Impact (18+ months)
The net effect is likely neutral to slightly positive for domestic scrap prices. While the initial duty removal would reduce import costs by 2.5%, the resulting expansion in recycling capacity and increased downstream demand would absorb the additional supply. The real winners would be small and medium recyclers who gain access to better quality material at competitive prices.
The India-Gulf Scrap Trade Connection
This policy debate has particular significance for the India-Gulf scrap trade corridor. The Middle East — especially UAE and Oman — is a major source of aluminium scrap for Indian recyclers.
Why Gulf Scrap Matters for India
- GCC produces 5.5 million tonnes of primary aluminium annually (EGA, Alba, Ma'aden, Sohar Aluminium), generating significant process scrap and dross
- Short shipping distances — 3-5 days from Dubai/Sohar to Indian ports vs. 25-35 days from Europe
- Competitive pricing — Gulf scrap is often 5-10% cheaper than European scrap after logistics
- Growing recycling ecosystem — Events like the Oman Aluminium Scrap Recycling Symposium signal the Gulf's increasing focus on scrap value chains
Removing the 2.5% duty would make Gulf-origin aluminium scrap even more competitive, potentially increasing trade volumes between India and the Middle East. For scrap dealers in both regions, this means more business opportunities and the need for better price intelligence.
Cross-Border Price Comparison
At GetScrapRate.com, we provide real-time scrap price tracking across multiple countries, enabling traders to identify profitable arbitrage opportunities:
| Country | Aluminium Scrap Price | Currency |
|---|---|---|
| India | 145-180/kg | INR |
| UAE | 3.50-4.50/kg | AED |
| Oman | 0.14-0.20/kg | OMR |
| Pakistan | 450-600/kg | PKR |
These price differentials, combined with potential duty removal, create actionable trading opportunities for cross-border scrap dealers. Monitor live prices on ScrapRates.in (India) and GetScrapRate.com/om (Oman) to time your trades.
What BigMint Says About the Future
Commodities consultancy BigMint has provided a balanced assessment of the market outlook: "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."
This projection suggests that regardless of the duty decision, India's dependence on imported scrap will continue for the foreseeable future. The question is whether India makes it easier and cheaper for its recyclers to access this material, or whether cost barriers push business to competing countries.
What Scrap Dealers Should Do Now
For Indian Scrap Dealers and Recyclers
- Monitor policy developments — The PMO's response to MRAI's letter will be a key indicator. Budget announcements and trade policy updates could bring changes at any time
- Build Gulf supply relationships now — Whether duty goes to zero or stays at 2.5%, the India-Gulf scrap corridor is growing. Establish contacts with dealers in UAE and Oman
- Invest in sorting and grading — As the market matures, quality premiums will widen. Clean, alloy-specific scrap commands 20-30% higher prices than mixed grades
- Track daily prices — Use ScrapRates.in to monitor real-time price movements across 400+ cities and make informed buying/selling decisions
For Gulf-Based Scrap Exporters
- India is your largest growth market — With 85% import dependency and demand set to quadruple, Indian recyclers need your material
- Duty removal would boost volumes — Prepare for increased enquiries from Indian buyers if the policy changes
- List your business on GetScrapRate — Get visibility among Indian buyers searching for Gulf scrap suppliers. Register here
- Quality documentation matters — Indian recyclers need ISRI-grade specifications, certificates of analysis, and consistent quality to justify import logistics
For Investors and Industry Stakeholders
- The secondary aluminium sector is undervalued — Contributing 40% of India's aluminium supply with minimal institutional investment, this sector is ripe for consolidation and modernisation
- Recycling infrastructure is the bottleneck — India's domestic scrap collection rate is low compared to developed countries. Investments in collection networks and processing technology will yield strong returns
- Digital platforms are transforming the market — Price transparency, online dealer networks, and cross-border trade facilitation are creating new business models in the scrap industry
Conclusion
The MRAI's letter to the PMO is more than a lobbying exercise — it reflects the fundamental pressures facing India's aluminium recycling industry. With domestic scrap availability insufficient to meet demand, international trade becoming more complex, and sustainability requirements tightening, the 2.5% import duty has become a meaningful barrier for an industry that contributes significantly to India's manufacturing base and environmental goals.
Whether the duty is removed in the next budget or phased out gradually, the direction is clear: India needs more aluminium scrap, and it will increasingly look to international markets — particularly the Gulf — to meet that need. Scrap dealers and recyclers who position themselves at the intersection of this trade, with the right relationships, quality standards, and market intelligence, will be the winners in this evolving landscape.
Stay updated on aluminium scrap prices across India and the Gulf at ScrapRates.in and GetScrapRate.com.
Sources: Reuters, Material Recycling Association of India (MRAI), Ministry of Mines, BigMint Commodities Consultancy. Published April 21, 2026.