The Budget 2026 Recycling Industry debate has intensified as India’s recycling sector calls for open trade in scrap and recycled goods. Stakeholders argue that trade liberalization, GST reforms, and infrastructure support are critical to advancing India’s circular economy, reducing manufacturing costs, and boosting sustainability. (Times of IndiaThe stakes are high: leaders warn that tariff barriers and restrictive trade policies could undermine efforts to build a robust circular economy, stifle investment, and weaken environmental outcomes.
This debate reflects deepening tensions between domestic protectionist impulses and the need to integrate India’s resource recovery economy into global supply chains. Here’s a comprehensive look at why the recycling sector is raising the alarm, what it wants from Budget 2026, and how this intersects with broader economic, environmental, and industrial priorities.
1. Recycling and the Circular Economy — Why Trade Matters
At its core, the circular economy is about keeping materials in productive use for as long as possible through recycling, reuse, and remanufacturing. Rather than the traditional “take‑make‑dispose” model, circular systems reduce resource extraction, lower waste, and cut emissions. Materials like metals, plastics, paper, and e‑waste are repeatedly recovered and re‑cycled into new products, extending their lifecycle and reducing environmental impact.
For the recycling sector, global trade in scrap and reusable materials is a critical enabler of this model. Export and import flows help balance supply and demand across markets. Some countries — particularly advanced economies — generate a structural surplus of recyclable materials. Without viable export markets, that surplus can stagnate, lowering returns for recyclers and ultimately discouraging investment in recycling infrastructure.
At the same time, many manufacturing economies—including India—depend on imported recycled inputs to meet demand for secondary raw materials used in steel, aluminium, and other industrial sectors. Restrictions on this flow can drive firms back toward virgin materials, undermining both circularity and climate goals.http://[Recycling Policies in India](https://www.mrai.in/recycling-policies/)
2. What the Recycling Sector Wants in Budget 2026
a. Open Trade and Low Tariffs on Scrap Goods
Industry leaders are making a clear case: free, open trade in scrap and recycled goods must be protected and encouraged, not blocked by tariffs or export bans. They argue that tariff barriers, such as high duties or export restrictions, could hurt the circular economy by reducing market access for recyclers and lowering global demand for recovered materials.
This demand ties back to recent global shifts. Tariff regimes in some major economies have increased dramatically — average rates in the U.S. for some materials have risen to nearly 18%, up from historical averages of around 2%. Though bilateral recycling flows (such as between the U.S. and India) have shown resilience, industry voices warn that protectionism could spread, jeopardising long‑term cooperation and investment.
Industry associations are urging policymakers to:
b. Tax Reforms to Boost Formal Recycling
Alongside trade demands, the recycling sector has identified domestic tax policy as a major barrier.
Under the current GST framework in India, several recycled materials — including metal scrap — are taxed at an 18% rate, the same as virgin materials. Recyclers argue this creates an “inverted duty structure” that:
- Discourages formal sector participation.
- Pushes dealers into informal, cash‑based transactions with no tax compliance.
- Reduces the competitiveness of recycled goods relative to new raw inputs.
To address this, industry associations—including the Material Recycling Association of India (MRAI)—are calling for:
- GST reduction to 5% on scrap and recycled products.
- Removal of duties on specific imported scrap categories (like aluminium).
- Simplified compliance mechanisms that encourage formal transactions at all stages of the recycling chain.
Such reforms would align fiscal policy with circular economy objectives, reduce informal work, and improve traceability and labour conditions across the recycling ecosystem.
c. Broader Policy and Regulatory Support
Beyond trade and GST, other policy priorities include:
- Strengthening Extended Producer Responsibility (EPR) frameworks for e‑waste, plastics, tyres, and other waste streams to ensure producers take financial or operational responsibility for end‑of‑life material recovery.
- Accelerating adoption of green manufacturing and recycling technologies.
- Promoting scrap collection and informal worker formalisation via digital payment incentives.
- Expanding domestic demand for recycled content, including through minimum recycled content mandates in manufacturing.
These intersect with wider industrial priorities, including India’s decarbonisation goals and plans for green and circular industrial growth.
3. The Global Context: Trade Barriers, Protectionism, and Recycling
India is not alone in facing pressures around scrap trade. Globally, recycling associations have pushed back against protectionist measures and export bans that would limit the cross‑border flow of recovered materials — arguing that restrictions often harm recyclers and supply chains more than they benefit domestic industries.
In Europe, for example, recycling bodies have opposed proposals to keep scrap within the bloc without ensuring matching downstream demand — citing risks of price pressure, reduced collection rates, and job losses if recycled materials can’t be efficiently traded.
Industry representatives argue that harmonised, transparent international rules — rather than unilateral protectionist measures — are crucial to nurturing both recycling markets and circular economies worldwide.
4. Why Open Trade in Scrap Matters for India
For India specifically, the recycling sector’s demands have multiple implications:
a. Industrial Growth and Resource Security
India is rapidly expanding its manufacturing base — from steel and aluminium to electronics and batteries. Secondary materials from recycling processes are strategic inputs for these sectors. Ensuring reliable access to international scrap flows helps manufacturers manage costs and reduce dependence on virgin resource imports.
Moreover, India’s scrap export markets, like those with the U.S., have grown substantially — nearly six‑fold over two decades — underscoring the mutual benefits of open trade in recyclables.
b. Environment and Climate Impact
By substituting virgin materials with recycled inputs, recycling reduces energy usage and greenhouse gas emissions over material lifecycles. For example, recycled steel uses substantially less energy than primary production from iron ore. Maintaining open scrap trade strengthens the ability of India’s industries to decarbonise while meeting growth targets.
c. Jobs and Informal Sector Inclusion
The recycling sector supports millions of livelihoods in India, from informal scrap collectors and small dealers to workers in processing facilities. Tax and trade reforms that boost the formal economy can:
- Bring more workers into regulated, safer employment.
- Expand income and social security coverage.
- Formalise business practices — improving traceability and worker protections.
5. Potential Tradeoffs and Policy Challenges
Despite strong industry backing, policymakers face tradeoffs:
- Domestic industry protection: Some domestic manufacturers argue that cheap imported scrap can undercut local suppliers or expose them to dumping. Balancing these concerns with open trade policies is politically sensitive.
- Revenue considerations: Reducing GST or duties may reduce short‑term government revenues, even if it boosts long‑term economic activity.
- Global trade uncertainties: Escalating global tariff disputes complicate India’s position in negotiating trade terms that protect recyclers without over‑committing in sensitive sectors.
However, proponents argue that thoughtful, targeted fiscal reforms can generate more sustainable growth, attract investment, and position India as a circular economy leader in the region.
6. Conclusion: A Critical Moment for Circular Economy Policy
As Budget 2026 nears, the recycling sector’s push for open trade in scrap and recycled goods highlights a pivotal moment for India’s circular economy. Industry groups are united in arguing that tariff barriers, restrictive policies, and high tax rates could stifle growth, discourage investment, and weaken environmental outcomes.
Their message is clear: supporting open trade, reducing tax burdens, and building integrated policy frameworks will not only strengthen the recycling sector but also advance India’s industrial, climate, and economic goals.
Whether policymakers take up these calls remains to be seen — but the debate underscores an evolving recognition of the role that circular economy principles play in shaping India’s economic future.
