The structural health of a nation’s manufacturing sector can often be measured in metal. As India pushes aggressively to position itself as a global engineering, electronics, and green-energy hub under the Make in India initiative, one material stands out as indispensable: Aluminium.
Dubbed the metal of the future, its unique properties—high strength-to-weight ratio, exceptional conductivity, corrosion resistance, and infinite recyclability—make it the foundational bedrock for India's strategic transformation. However, a deepening friction between the country’s raw material economics and its trade policy framework is creating a severe bottleneck.
Aluminium is no longer just a metal for kitchenware or overhead power lines; it is a critical strategic resource deeply tied to India's national security, climate goals, and high-tech ambitions. In the transition to green energy, aluminium is foundational.
A single megawatt of solar power infrastructure requires over 19 tonnes of the metal for structural framing and mounting brackets. Similarly, the rapid adoption of electric vehicles (EVs) relies entirely on vehicular lightweighting to extend battery range, making aluminium the primary choice for battery enclosures, cooling plates, and structural components.
Beyond green technology, the metal is vital to the power infrastructure sector, where India's aggressive grid expansions rely heavily on aluminium conductors to replace prohibitively expensive copper. A Vision Document for the Aluminium Metal by the ministry of mines points out that 55% usage of primary aluminium (ingots) in India is in the power sector alone.
{{/usCountry}}Beyond green technology, the metal is vital to the power infrastructure sector, where India's aggressive grid expansions rely heavily on aluminium conductors to replace prohibitively expensive copper. A Vision Document for the Aluminium Metal by the ministry of mines points out that 55% usage of primary aluminium (ingots) in India is in the power sector alone.
{{/usCountry}}In the same document, building and construction sector came a distant second with 15% followed by 8% in packaging, 7% each in auto and consumer durables sectors, and 8 percent in other sectors. Despite the exponential growth of these sectors where aluminium is used, India’s per capita consumption of aluminium is only 2.5kg and remains significantly lower than the global average of 11kg. The Union government estimates that India’s aluminium demand could increase to approximately nine million tonnes by 2033 from the current 4.5 million tonnes.
India has the 5th largest reserves of bauxite, a mineral required for extracting aluminium. India also has the second largest aluminium smelting capacity after China. Higher domestic consumption, greater conversion of primary aluminium into value-added products and the expansion of downstream manufacturing capacity will be necessary for the production to meet the demands.
Indian upstream giants like Vedanta, Hindalco, and the State-run NALCO have built world-class, integrated smelting capacities. Yet, despite this robust raw material base, India's downstream manufacturing sector—comprising over 3,500 micro, small, and medium enterprises (MSMEs) that turn raw metal into finished auto parts, conductors, and electronics components—is struggling to stay globally competitive.
The core of India’s aluminium crisis lies in a profound policy disconnect.
India imposes a basic customs duty on primary aluminium of 7.5% plus an additional 0.75%, a social welfare surcharge, adding up to 8.25%. Domestic primary producers price their metal using an import-parity pricing model. This means an Indian MSME buying aluminium from a primary aluminium player must pay the London Metal Exchange (LME) base price, plus premium, plus ocean freight, plus the 8.25% domestic import duty—even though the metal never crossed an ocean or entered a port. This has become more consequential as global aluminium prices have increased from approximately $ 2,630 per tonne in 2025 to $ 3,341 per tonne in 2026, an increase of around 27% owing to the conflict in West Asia and tightening controls on export of primary aluminium by many countries including China.
This artificially high input cost collides disastrously with India's Free Trade Agreements (FTAs). Under bilateral trade agreements with ASEAN nations and the UAE, finished value-added downstream aluminium products (like extrusions, sheets, and foils) enter the Indian market at zero or near-zero customs duties. This creates a severe inverted duty structure.
An Indian manufacturer pays an effective tariff premium on raw aluminium inputs, while their regional competitors in Southeast Asia source raw materials at global baseline rates and dump finished components into India duty-free. The resulting economic distortions are clearly visible in India’s trade metrics: over 61% of India’s aluminium exports consist of basic, unworked primary ingots, sent abroad to power foreign factories.
Conversely, high-value, fabricated products dominate India's import profile. By allowing this structural imbalance to persist, India is effectively exporting its natural mineral wealth and buying back finished products—the exact antithesis of Make in India.
To transform this bottleneck into a competitive advantage, the government must adopt a balanced policy framework that protects the exchequer and honours international trade treaties while restoring a level playing field for domestic manufacturers.
First, the country must rationalise the 8.25% import duty on primary aluminium. The duty reduction will reduce the cost disadvantage faced by domestic manufacturers, support greater value addition, strengthen the domestic manufacturing base, improve the competitiveness of MSMEs, and help boost exports of finished and semi-finished goods by the aluminium downstream industry.
Second, New Delhi must aggressively enforce WTO-compliant trade remedies and non-tariff barriers rather than relying on blunt tariff hikes. Instead of renegotiating slow-moving FTAs, the ministry of commerce should utilise Rules of Origin under CAROTAR. Strictly verifying that imports from ASEAN nations have undergone significant local processing (e.g., a 35-40% value-addition threshold) will effectively block the illicit transshipment of subsidised Chinese aluminium products.
Third, the upstream industry landscape must be made structurally competitive by breaking market concentration. The ministry of mines should fast-track the auctioning of virgin bauxite blocks, encouraging domestic infrastructure conglomerates to enter the primary smelting space. Future mineral auctions should also introduce specialised captive-use clauses, capping extreme bid premiums in exchange for commitments to supply a fixed percentage of primary output directly to domestic MSMEs at global benchmark prices.
Finally, the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme should be optimised to offer higher rebate slabs exclusively for value-added fabricated products, while tapering incentives for basic unworked metal.
India stands at a critical juncture where its manufacturing ambitions are limited only by the health of its foundational supply chains. Aluminium is the lifeblood of tomorrow’s infrastructure, transportation, and clean energy economies.
By liberalising aluminium trade in raw materials including primary aluminium, India can build a highly resilient, fully integrated aluminium value chain. Resolving this conundrum will not only protect domestic jobs and bolster the exchequer but will ensure that the metals mined from India's soil directly power the factories, EVs, and clean energy grids of a developed nation.
(The views expressed are personal)
This article is authored by Aditya Bhan, associate professor and Head of Department, Global Business, Inspiria Knowledge Campus, Siliguri.