Rising input costs threaten country’s manufacturing ambitions amid increasing demand for aluminium: Study – ET Manufacturing

Impact of Aluminium Import Duties on India’s Sustainable Development Goals

Executive Summary

A recent report by CUTS International indicates that India’s current import duty structure on aluminium is impeding progress towards key Sustainable Development Goals (SDGs) by constraining the growth of Micro, Small, and Medium Enterprises (MSMEs). Despite a projected increase in domestic demand from 5.3 million to 8.3 million tonnes by 2030, high input costs threaten the nation’s manufacturing ambitions and its sustainable development trajectory, which are central to the Viksit Bharat 2047 vision.

Economic Disadvantage and Sectoral Impact

The study highlights that the existing duty framework artificially inflates domestic aluminium prices above international levels. This places Indian manufacturers at a significant competitive disadvantage, particularly impacting sectors critical for sustainable development.

• Construction and Infrastructure: Essential for building resilient infrastructure and sustainable cities (SDG 9, SDG 11).
• Renewable Energy Infrastructure: Crucial for the transition to affordable and clean energy (SDG 7).
• Electric Vehicles (EVs): A key component in developing sustainable transport systems and combating climate change.
• Electronics Manufacturing: A driver of innovation and modern, sustainable industry (SDG 9).

Alignment with Sustainable Development Goals (SDGs)

The report’s findings directly correlate the challenges faced by the aluminium sector with the achievement of several SDGs.

• SDG 8 (Decent Work and Economic Growth) & SDG 9 (Industry, Innovation, and Infrastructure): The high cost structure undermines the competitiveness of approximately 3,500 aluminium MSMEs, which are vital for job creation and inclusive industrialization. A constrained MSME sector limits innovation and the development of a robust domestic manufacturing value chain.
• SDG 7 (Affordable and Clean Energy) & SDG 11 (Sustainable Cities and Communities): Elevated aluminium costs act as a barrier to the cost-effective deployment of renewable energy projects and the development of sustainable urban infrastructure, including green buildings and public transport solutions.
• SDG 12 (Responsible Consumption and Production): The current policy environment encourages the export of primary bulk metal rather than fostering a domestic ecosystem for higher-value, finished products. Enhancing domestic manufacturing capabilities would promote more sustainable production patterns and reduce the carbon footprint associated with shipping raw materials.

Policy Recommendation: Duty Rationalisation for Sustainable Growth

The report advocates for the rationalisation of import duties on aluminium as a strategic imperative for national industrial policy and sustainable development. This policy adjustment is projected to yield multiple benefits aligned with SDG targets.

1. Enhanced MSME Competitiveness: Lower input costs would empower MSMEs to compete effectively against duty-free finished imports under Free Trade Agreements (FTAs), fostering local economic growth (SDG 8).
2. Job Creation: Increased competitiveness in downstream, labour-intensive sectors such as extrusions, castings, and fabricated products would lead to significant employment generation.
3. Value Chain Upgradation: It would enable a strategic shift from exporting primary metal to capturing higher-value export markets for finished goods, promoting sustainable industrialization (SDG 9).
4. Innovation and Growth: By alleviating cost pressures, policymakers can unlock the full potential of India’s aluminium value chain, driving innovation and economic growth across industrial clusters from Odisha to Gujarat and Tamil Nadu to Maharashtra.

Analysis of Sustainable Development Goals (SDGs) in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth: The article directly addresses economic growth by discussing India’s industrial growth, the competitiveness of its manufacturing sector, and the creation of jobs in labor-intensive downstream sectors. It focuses on the economic health and potential of Micro, Small, and Medium-sized Enterprises (MSMEs).
• SDG 9: Industry, Innovation and Infrastructure: This goal is central to the article, which revolves around India’s manufacturing goals, the aluminium value chain, and industrial policy. It highlights the importance of supporting MSMEs, fostering innovation, and developing industrial clusters in states like Odisha, Gujarat, Tamil Nadu, and Maharashtra. The mention of sectors like construction, renewable energy infrastructure, and electric vehicles directly relates to infrastructure development.

2. What specific targets under those SDGs can be identified based on the article’s content?

SDG 8: Decent Work and Economic Growth

• Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation. The article supports this by advocating for a policy shift that would position India to “capture higher-value export markets, moving beyond bulk primary metal sales,” which implies a move towards more productive, value-added activities.
• Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises (MSMEs). The article explicitly focuses on how rationalizing import duties would support India’s “3,500 aluminium MSMEs,” enhance their competitiveness, and “create jobs in labour-intensive downstream sectors.”

SDG 9: Industry, Innovation and Infrastructure

• Target 9.2: Promote inclusive and sustainable industrialization. The article’s core argument is about creating a national industrial policy that unleashes the “full potential of India’s aluminium value chain” and drives growth “across industrial clusters,” making industrialization more inclusive by supporting smaller enterprises.
• Target 9.3: Increase the access of small-scale industrial and other enterprises to value chains and markets. The article highlights that the current duty structure constrains MSMEs. It argues that duty rationalization would enable these enterprises to “compete effectively against duty-free finished imports” and expand their “market share in extrusions, castings, and fabricated products.”

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Domestic Aluminium Demand: The forecast that demand will rise from “5.3 million tonnes” to “8.3 million tonnes by 2030” serves as a direct indicator of industrial growth and activity (relevant to Target 9.2).
• Number and Competitiveness of MSMEs: The article mentions “3,500 aluminium MSMEs.” Tracking the growth in the number of these enterprises and their market share would be a key indicator of the success of policies aimed at supporting them (relevant to Targets 8.3 and 9.3).
• Job Creation: The goal to “create jobs in labour-intensive downstream sectors” is a direct, measurable outcome. The number of jobs created in these sectors would be a primary indicator of progress (relevant to Target 8.3).
• Shift in Export Composition: Progress towards moving “beyond bulk primary metal sales” to “capture higher-value export markets” can be measured by analyzing the country’s export data, specifically the ratio of value-added aluminium products to primary aluminium exports (relevant to Target 8.2).

4. Table of SDGs, Targets, and Indicators

Source: m.economictimes.com