Targeted Customs Duty Reforms On Critical Industrial Inputs to Strengthen Manufacturing Competitiveness: PHDCCI

New Delhi, November 6, 2026: The PHD Chamber of Commerce and Industry (PHDCCI), in its Pre-Union Budget 2027–28 recommendations, has called for targeted customs duty rationalization on critical industrial raw materials and energy inputs to reduce manufacturing costs, strengthen domestic value chains, improve energy security and enhance India's global competitiveness.
Highlighting the cross-sector implications of input cost competitiveness, we identified five priority recommendations with significant linkages across multiple industries, including energy, fertilisers, steel, aluminum, petrochemicals, infrastructure, construction, textiles and engineering.
India's manufacturing competitiveness is closely linked to the availability, affordability and quality of essential industrial inputs. Customs duties on critical feedstocks and intermediate materials can have cascading implications for production costs, investment decisions and the competitiveness of downstream industries.
"Strengthening India's manufacturing competitiveness requires a comprehensive approach to reducing the cost of critical industrial inputs. Energy and feedstock costs have a cascading impact across multiple sectors, influencing production economics, investment decisions and the competitiveness of downstream industries said Anil Gupta, President, PHDCCI.
The five priority recommendations are as follows:
1. Reduce Basic Customs Duty on LNG from 2.5% to Nil
PHDCCI has recommended eliminating Basic Customs Duty on Liquefied Natural Gas (LNG) to improve the affordability of imported natural gas and support its wider industrial utilization. With India's LNG import dependence estimated at approximately 50% of consumption, rationalizing the duty structure can benefit several energy-intensive industries.
LNG is an important input for fertilizer production, electricity generation, city gas distribution, steel manufacturing, refineries and petrochemicals. Improved affordability can also support the expansion of LNG-based transportation infrastructure and industrial energy applications.
2. Reduce Basic Customs Duty on Heavy Petroleum Feedstocks from 2.5% to Nil
The Chamber has proposed eliminating BCD on heavy petroleum feedstocks, including fuel oil, vacuum residue, slurry and vacuum gas oil (VGO), classified under HSN 2710 19, when imported for refinery processing.
Indian refiners have invested in processing infrastructure capable of utilising these feedstocks. Given the sourcing challenges associated with heavy crude oil amid geopolitical uncertainties, access to alternative heavy feedstocks can provide greater operational flexibility and reduce dependence on conventional crude oil supplies.
These materials also have applications across power, textiles, fertilisers, shipping, cement, tyre and rubber manufacturing, petrochemicals and road infrastructure, making their cost competitiveness relevant to a wide industrial ecosystem.
3. Reduce Basic Customs Duty on Naphtha from 2.5% to Nil
Recognizing naphtha's importance as a critical petrochemical feedstock, PHDCCI has recommended eliminating BCD on naphtha (HSN 2710 12 29).
Naphtha is an essential input for producing olefins, aromatics and other petrochemical intermediates, which form the foundation of several downstream manufacturing industries. It also supports the production of urea and other chemical products.
According to the Department of Chemicals and Petrochemicals, naphtha consumption in the petrochemical sector increased from 11,339 thousand tonnes in FY2020–21 to 11,457 thousand tonnes in FY2024–25.
Reducing customs duty on naphtha can help improve feedstock economics, support domestic petrochemical capacity utilisation and strengthen downstream industries such as plastics, packaging, automotive components, synthetic materials and chemicals.
4. Rationalize Customs Duty on Petroleum Coke Used in Industrial Manufacturing
PHDCCI has recommended reducing BCD on calcined petroleum coke (CPC) used for aluminium anode manufacturing from 7.5% to 2.5%, and on raw petroleum coke (RPC) from 10% to 2.5%.
CPC and RPC are essential inputs in the manufacture of carbon anodes required for aluminium smelting. Together, these inputs account for approximately 10–15% of the relevant input cost basket in aluminium production. The Chamber has highlighted that existing duties, combined with quantitative restrictions on imports, increase the cost burden on domestic aluminium manufacturers.
Beyond aluminium, petroleum coke is an important industrial material with applications in steel, titanium dioxide, foundry and carbon-material industries. Rationalising duties on these inputs can therefore support multiple segments of the domestic manufacturing and metallurgical ecosystem.
5. Continue the Existing Basic Customs Duty Framework on Steel Scrap Beyond March 2028
The Chamber has recommended continuing the existing Basic Customs Duty framework on steel scrap beyond March 2028, recognising its importance as a critical raw material for electric arc furnace (EAF) and induction furnace-based steelmaking.
India's steel industry relies on imported scrap to supplement domestic availability and support secondary steel production. Steel scrap is recycled and remelted to manufacture crude steel, billets, blooms, slabs, TMT bars, structural steel, sheets, plates, pipes and other finished steel products.
Its availability is important for construction, infrastructure, automotive, engineering and capital goods industries. Maintaining a predictable duty framework can support the availability of this essential input while encouraging resource efficiency and recycling in the domestic steel industry.
Rationalizing customs duties on LNG, heavy petroleum feedstocks and naphtha, alongside ensuring competitive access to essential raw materials such as petroleum coke and steel scrap, can provide meaningful support to India's industrial ecosystem. A predictable and balanced tariff framework will be important for strengthening domestic value chains, encouraging capacity expansion, reducing input cost pressures and enhancing India's integration into global manufacturing networks."
“We believe that an attuned customs duty framework focused on essential industrial inputs can generate benefits beyond individual sectors by improving cost competitiveness across interconnected manufacturing value chains. Such measures can also support investment in domestic processing capacities, strengthen supply-chain resilience and contribute to India's broader objectives of industrial development, energy security and higher domestic value addition said Dr. Ranjeet Mehta, SG & CEO, PHDCCI.”