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– By Aruna Sharma
In our rapidly evolving world, aluminium is emerging as an indispensable metal in the next chapter of human progress. Developed economies such as the United States of America and the European Union have already recognised the metal’s immense potential, deeming the metal of strategic importance and raising barriers to ensure supply security and protect their domestic industries. India, however, is at a crossroads. Missing the bus in establishing high-tech manufacturing and electric vehicles (EV) ecosystems is an invaluable reminder of the need to create a solid foundation for technological innovation. Aluminium is known for being widely used in advanced and sustainable applications across sectors. With timely interventions, India can position the metal as the cornerstone of its Viksit Bharat vision, fostering a resilient economic landscape.
Recent developments provide a mixed bag of opportunities and challenges. On the one hand, bullish market sentiment in aluminium is resurging owing to its versatile applications. China’s decision to cancel its export tax rebate policy is a game-changer, likely making Chinese aluminium more expensive in international markets, offering a potential opening for Indian producers. On the other hand, India’s aluminium industry is stagnating under the onslaught of primary and scrap imports – both from Free Trade Agreement (FTA) and non-FTA nations – undermining local manufacturers and discouraging fresh investments into capacity expansion.
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The Indian government has signalled its intent to revitalise manufacturing with new incentives as preparations for Budget 2025 gather steam. These efforts align with broader economic ambitions, including transformative infrastructure projects like the ambitious Bharatmala Pariyojana project and a concerted push toward renewable energy and EVs. Global aluminium demand remains resilient, driven by the rising usage in solar panels, EVs, and expanded power-grid infrastructure. Domestically, aluminium consumption is projected to double to 10 million tonnes per annum (MTPA) by 2030, requiring significant capacity expansion. However, achieving this will necessitate overcoming substantial policy and structural barriers.
Key critical policy changes, including raising import duties on primary and downstream aluminium products from 7.5% to 10% and aligning scrap duties at 7.5%, will be crucial to attract new investments in the aluminium sector. These measures should not be viewed as protectionist indulgences but as essential steps to level the playing field for domestic producers facing aggressive pricing by global competitors seeking to dump their surplus production in India.
The surge in low-quality aluminium scrap imports has been facilitated, particularly by the meagre 2.5% import duty that currently exists. This creates duty arbitrage, allowing substandard foreign inputs to quickly enter and flood the market. Such imports affect the viability of domestic manufacturing and compromise their safe usage in applications like food packaging and key infra projects. Encouraging high-quality domestic recycling through policy incentives could shift this balance, promoting a circular economy while reducing reliance on imports.
The broader implications of strengthening the domestic aluminium industry cannot be overstated. It is intricately linked to strategic sectors like defence, renewable energy, and EVs. Advanced aluminium alloys are critical in aerospace, naval vessels, and missile systems. The metal’s role in renewable energy is equally vital, with 85% of solar panel components relying on aluminium for their production. With India targeting 500 GW of non-fossil fuel capacity by 2030, the need for aluminium in India’s progress will only rise in the coming years. Creating a suitable environment for a robust domestic industry is vital to meeting this need adequately.
Meeting future demand will require an additional Rs three lakh crore over the next six years. This level of investment is achievable only if domestic players find it worthwhile to invest. Safeguarding the sector against cheap imports and addressing regulatory bottlenecks will position India as a global leader. Disruptions in supply chains due to ongoing geopolitical frictions have further underscored the need for national self-reliance.
As the world recognises the importance of aluminium as a strategic metal, India must follow suit in relooking its policies. This is not just about economic competitiveness; it is about securing our future in a world increasingly prioritising sustainability, resilience, and strategic autonomy. Aluminium’s benefits are self-evident, and it can become a catalyst for our global aspirations.
(Aruna Sharma, Practitioner Development Economist and Former Secretary, Govt of India.)
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