A report by the Policy Consensus Centre, which conducts research for policy transformation, has recommended a phased, time-bound reduction of the basic customs duty on primary aluminium to zero.It recommended that the reduction be supported by targeted energy cost compensation measures for primary producers to ensure a balanced transition. The centre, in its study, reported that India’s downstream aluminium MSMEs are facing mounting cost pressures due to the existing duty structure on primary aluminum. This is undermining their domestic value addition and eroding their manufacturing competitiveness, it said.Import parity pricingNirupama Soundararajan, Co-Founder, Policy Consensus Centre, said, “The current tariff structure needs a relook. India’s aluminium manufacturing practices import parity pricing, leading to high raw material price for secondary manufacturers. For MSMEs in the sector, raw materials make up nearly 80 per cent of production price. Hence, the high duties and the import parity pricing significantly affect MSMEs’ very existence.”It suggested correcting tariff inversions through measures such as stronger rules of origin, tariff-rate quotas where appropriate, enhanced verification under free trade agreements, and targeted trade remedies against unfairly priced imports. The report said rationalising duties on primary aluminium will improve the competitiveness of downstream MSMEs, stimulate domestic manufacturing, encourage higher value addition and support India’s broader objectives of employment generation, industrial growth and the Make in India initiative.It said that while India is the world’s second-largest producer of primary aluminium with an installed capacity of over 4.16 million tonnes annually, nearly 3,500 downstream and secondary aluminium manufacturers, the overwhelming majority of them micro, small and medium enterprises (MSMEs), continue to operate under significant structural disadvantages. “These enterprises account for nearly 90 per cent of employment across the aluminium value chain and supply critical inputs to sectors including power transmission, renewable energy, railways, electric vehicles, construction and engineering,” the report said.Job creation issueOne of the most significant challenges facing MSMEs is the customs duty, along with the social welfare surcharge, on primary aluminium. Domestic primary producers price aluminium on an import parity basis by incorporating customs duties into domestic prices, resulting in downstream manufacturers paying import-equivalent prices even when sourcing metal produced within India, it said. The report said the pricing mechanism raised raw material costs substantially, compressing already thin operating margins and weakening the competitiveness of India’s value-added manufacturing sector.The study said an inverted duty structure placed a higher tariff burden on primary aluminium than on several finished aluminium products. “Simultaneously, free trade agreements with ASEAN, Japan and South Korea allow many finished aluminium products to enter India at concessional or zero duty rates, intensifying competitive pressure on domestic MSMEs,” it said.Soundararajan said India has over 10,000 downstream MSMEs and several of these employ 90 per cent of the aluminum industry’s workforce. “Therefore, their contribution to job creation and exports is notable. There is a need to ensure that value-added exports remain competitive at the global stage and that MSMEs remain viable for India’s manufacturing and export story to continue an upward trend,” she said.Published on July 30, 2026