NEW DELHI: India’s aluminium tariff regime is pushing the country towards becoming a supplier of raw metal rather than a global manufacturing hub, with a majority of aluminium exports leaving the country in primary form even as imports of finished products continue to rise, according to a report released by the Global Trade Research Initiative (GTRI) on Thursday.
The think tank said 61.4 per cent of India’s aluminium exports worth $7 billion in FY26 were primary aluminium metal, while the country imported $4.1 billion worth of finished aluminium products that compete directly with domestic manufacturers. In contrast, 97.2 per cent of China’s aluminium exports comprised value-added products.
Calling the trend a distortion of the aluminium value chain, the report argued that existing tariff policies encourage exports of primary aluminium while raising raw material costs for domestic manufacturers and micro, small and medium enterprises (MSMEs) through import-parity pricing.
The report warned that India risks forfeiting opportunities for higher value addition, investment, exports and employment by shipping out raw aluminium metal and importing value-added finished products made from the same metal.
To reverse the trend, GTRI proposed removing the 7.5 per cent import duty on unwrought aluminium and imposing a 20 per cent export duty on aluminium metal to keep more supplies available for domestic manufacturing.
The report said more than 3,500 MSMEs in the downstream aluminium sector face elevated input costs because domestic producers price aluminium at global benchmark rates plus the equivalent of the import duty. Since aluminium accounts for 60-80 per cent of production costs in many downstream industries, higher metal prices significantly erode competitiveness, it said.
According to GTRI, the policy distortion extends beyond private industry. Around one-fourth of India’s annual aluminium consumption is linked to government-funded sectors such as railways, power transmission, metro systems, renewable energy and defence. The import-parity pricing system raises costs of aluminium-intensive products by roughly 3 per cent, increasing public expenditure on infrastructure projects, the report said.
India imported about $10 billion worth of aluminium and aluminium products in FY26, of which finished products accounted for 41 per cent. About a quarter of finished-product imports entered India at low or zero duties under free trade agreements, further intensifying pressure on domestic manufacturers.
GTRI described the situation as an inverted duty structure, where manufacturers pay higher prices for raw materials while competing against lower-duty imports of finished goods.
The report urged policymakers to review tariff concessions on finished aluminium imports, correct inverted duty structures and provide targeted support to downstream industries such as cables, conductors, packaging, automotive components, engineering products and renewable energy equipment.
India produces around 6.2 million tonnes of aluminium annually and is among the world’s largest producers. However, GTRI argued that the country’s policy focus should shift from expanding primary metal production to maximising domestic value addition through manufacturing.
“India risks becoming a supplier of raw material while other countries capture the greater economic benefits from processing and manufacturing,” the report said.
Source: Business Standard
