Manufacturers seek reduction in import duty on raw materials in Budget 2027

Indian manufacturers have demanded a reduction in import duties on raw materials and intermediate goods in the 2027-28 Budget. According to a report by Mint, the industry claims that high input costs are harming local production and reducing the competitiveness of Indian goods. This information was provided by three individuals familiar with these discussions.

Various industry bodies, ranging from aluminium, textiles, and chemicals to export-oriented manufacturing, have stated that high and uneven duties on inputs are becoming a cost burden for downstream manufacturers, especially Micro, Small and Medium Enterprises (MSMEs). In some cases, they have argued that tariff rates on imported finished products are lower than the tariff rates on raw materials used by local manufacturers.

These demands come at a time when the Ministry of Finance is beginning preparations for the upcoming Budget, to be presented on February 1, 2027. Industry associations are meeting ministry officials and submitting their representations before the process commences. According to the schedule released by the Department of Economic Affairs on September 23, pre-budget meetings with ministries and departments began on October 12 and are scheduled to conclude on November 13.

The government has already provided temporary relief to some sectors. From June 1, 2026, cotton imports were exempted from customs duty. To improve the availability of raw materials for the textile industry, this exemption, which was to end on October 31, was extended until December 31.

In a joint pre-budget representation to Finance Minister Nirmala Sitharaman, the Aluminium Extrusions Manufacturers Association of India (ALEMAI) and other organisations have demanded that the Basic Customs Duty (BCD) on primary aluminium under tariff heading 7601 be reduced from 7.5% to zero. They state that the current tariff structure harms downstream manufacturers, especially MSMEs, who use aluminium as a primary raw material.

Jitendra Chopra, President of ALEMAI, representing more than 200 aluminium extrusion manufacturers across India, stated that approximately 20 factories have closed in the last three years due to the high cost of procuring raw materials, resulting in the loss of about 50,000 jobs. He added that India's installed aluminium extrusion capacity is 3 million tonnes, but the industry is currently operating at only 40% capacity. Reducing customs duty on primary aluminium and aluminium scrap would lower input costs, increase capacity utilisation, and help revive closed factories, thereby creating employment opportunities.

Chopra stated that the proposed duty rationalisation could generate an additional ₹4,400 crore in domestic taxable value addition at an illustrative rate of 18% and ₹792 crore in GST revenue. This amount would be equivalent to the customs revenue currently collected on primary aluminium imports.

On the other hand, the industry body PHDCCI has demanded that the BCD on graphite electrodes be reduced from 7.5% to zero. They stated that its role in electric arc furnace steelmaking is essential and no practical alternative is available for this use. Anil Gupta, President of PHDCCI, said during a pre-budget meeting that a rational customs duty structure for inputs such as molybdenum, ferro-alloys, graphite electrodes, and steel scrap could support domestic recycling and resource efficiency, improve cost competitiveness, strengthen downstream industries, and facilitate the transition towards more efficient steel production.