In a time where various economies are entirely functioning on recycled auto scrap; India, the fastest growing economy in the world, has taken inordinately long to foray into the business. Not only is scrap generation from auto recycling a big- buck making industry, it also comes with the added perk of being environment friendly by taking the old polluting vehicles off the roads. However, now, withstanding the odd- even rule, it has become apparent that India is consciously keen on making efforts to reduce air pollution and protect the environment. Road Transport and Highways Minister Nitin Gadkari in a recent media conference spoke of the need for a government policy for scrapping old vehicles, which are not only the greatest contributors to pollution, but also a menace towards safety on the roads.

Conventionally, vehicle scrap recycling in India has been a highly unorganized market where end of life vehicles are unsafely stripped and scrap metals and all sorts of recovered & refurbished parts are sold. Currently, there are no regulations to monitor these markets and take account of the recovered scrap, thus necessitating a government policy which recognizes scrap generation from auto recycling as a sustainable, environment friendly industry.

Considering the need of the hour and the huge underlying potential of the industry, Government of India under the Ministry of Road Transport & Highways is drafting a new scrapping policy or end of life policy, wherein rust bitten, smoke coughing, dilapidated End of Life Vehicles aka ELVs, causing safety and environment hazards would soon find a way to be scrapped in a systematic manner. The policy will provide various incentives to owners of old vehicles in lieu of surrendering them for scrapping. This policy initiative is likely to open new avenues for auto recycling in India and promises benefits that would help strengthen the economy.

Government Policy for ELVs

While we speak of the government policy for ELV’s, it is only just to speak of the National Green Tribunal’s (NGT) efforts at advocating banning of old diesel and petrol vehicles, which is gaining pace now. Beginning with Delhi, all vehicles over 15 years old were banned by NGT in Nov’14. Since then, petrol and diesel vehicles, typically 10-15 years old have been banned in Kerala, Bihar and most recently in Chhattisgarh. While a blanket ban on polluting vehicles in all states is being debated, hearing on the case is impending on July 11th; the government’s initiative in this regard is making headway.

Following cues from the developed auto-recycling markets, such as the US, Europe and China, which have a robust process for de-registering ELVs with dismantling units working in tandem with industry and government, the Indian government, within the purview of its proposed policy, is looking to push over 28 million units of decade old polluting vehicles off the roads. According to a SIAM report to the government, total number of vehicles registered from 1st April 1990 to 31st March 2000 is 30.55 million, and has the potential to generate INR 320 billions worth of scrap value. Union Minister Nitin Gadkari said it will boost the automobile industry turnover over 4 times to INR 20,000 billion in the next five years from present INR 4,500 billion.

Cover-Story_img1
The center on 26th May, issued a concept note for the voluntary vehicle scrapping scheme. Officially called the Voluntary Vehicle Fleet Modernization plan (V-VFM), the concept note has been issued to ascertain public and official reaction. The concept note contains guidelines for scrapping of vehicles bought on or before March 31, 2005 and has issued a three-step proposal as to how owners would benefit from participating in the programme.

For surrendering the old vehicles, people will have to deposit the copies of their registration certificate, an insurance policy of the vehicle, and proof of identity to the collection center. The collection center will then note down the details of the vehicle and the owner and then deposit the old vehicle at the collection center and collect the V-VMP certificate. The value of the scrap will be informed to the owner according to market rate. The entire process is transparent and after inspection, the scrap value will be handed to the owner.

“There are about 7 ministries involved in determining policies for auto-shredding in India, including Ministry of Steel; Ministry of Micro, Small and Medium Enterprises; Ministry of Heavy Industries & Public Enterprises, Ministry of Environment and Forests and others”, said Mr Sanjay Mehta, President, Metal Recycling Association of India”

HIGHLIGHTS of the Draft Policy

• The government is contemplating over replacement vehicles to be BS- IV compliant which will be out by April 2017.
• Diesel and Petrol vehicles over 10 years old will be banned
• When implemented on trucks and buses, the reduction in CO emission would be almost 17%, and HC + NOx reduction will be 18%, and 24% reduction can be seen in PM emission
• Vehicle owners who surrender their old vehicle will stand to benefit around 8 to 12% of the cost of the new vehicle
• The ministry has proposed tax exemptions of up to INR 30,000 for passenger vehicles and up to INR 150,000 for commercial vehicles
• Giving further thrust to emission control measures, the draft norms for the end of life policy are likely to provide about 50% rebate in excise duty on new vehicles for buyers who surrender their polluting old ones

 

Can India be the Next US, Europe or China in Auto Recycling?

The world’s largest and most evolved markets in auto-recycling are the US, Europe and China. These nations have been dismantling old vehicles since as far back as the 1970s, as in the case of the US. It is well known that these are scrap based markets and auto recycling is the reason why. Auto recycling in the US dates back to the 1970s; whereas, Europe and Japan began recycling in the 2000s, followed by China in 2012. The total market size of auto shredding in developed countries is approximately 30+ million cars, which generates about 27 million tonnes of scrap.

What is Auto Shredding?

The shredding of automobiles and major household appliances is a process where a hammer mill grinds the materials fed into it to fist- size pieces. The shredding of automobiles results in a mixture of ferrous metal, non-ferrous metal (eg alloys of copper and aluminium) and shredder waste, called automotive shredder residue or automobile shredder residue (ASR). ASR consists of glass, fiber, rubber, automobile liquids, plastics and dirt. ASR is sometimes differentiated into shredder light fraction and dust. Sometimes these residual materials are called ‘Car-fluff’.

Source: Wikipedia

 

Scope of Vehicle Recycling in India

India being the third largest producer of steel in the world carries a huge potential in auto-recycling. Being a thoroughly unorganized market, auto recycling in India can add numerous benefits in the nation’s kitty, beginning from a push to the automobile sector to savings in fuel and generating employment.

cover-story_img3

Recycling industry is betting heavy on this initiative by the government. At 25% (7 million cars) of total cars that could be scrapped initially, it is expected to generate business of around USD 2.9 billion (equivalent to ~INR 190 billion). These numbers are likely to grow over a period of time.

cover-story_img4

On an average, a car weighs 1,400-1,600 kgs. Upon recycling, it generates 65-70% steel scrap, 7-8% aluminum scrap, 1-1.5% copper scrap and 15-20% rubber and plastic scrap. At current scrap prices, a recycled car can fetch roughly INR 30,000-35,000 (USD 380-455).

Assuming 20-25% of vehicles are scrapped in first year, it has a potential of generating around 6 million tonnes (mnt) of scrap; ~150,000 mt copper scrap; ~0.8 mnt aluminum scrap and ~1.8 mnt plastic and rubber scrap. Numbers are expected to grow in years to come.

India’s Kick Start to Auto Shredding – MSTC and Mahindra Intertrade JV

MSTC Limited, a Mini Ratna Category-I PSU under the administrative control of the Ministry of Steel, Government of India and Mahindra Intertrade Limited (MIL) in a recently drafted MoU joined hands to set up the first auto shredding plant in India. The plant will be the first in the series of such auto shredding units to be built in the country. India’s foraying into the auto shredding market is also a step ahead in the Make in India campaign.

cover-story_img5

Steel 360 spoke to Mr SK Tripathi, Ex-CMD, MSTC (in whose tenure this initiative took shape) about the MoU. He said, “The MoU is signed with Mahindra Intertrade for setting up the first auto shredding plant in India. The next step would be formation of a JV between the two companies. MSTC intends to set up to 30 more such units across the nation.”

Will Auto-Shredding Impact Scrap Import in India?

While we speak of increased availability of domestic shredded scrap, it becomes imperative to mull upon its impact on import of the material. Speculation is wide whether auto-shredding in India would bring scrap imports down.

cover-story_img6

cover-story_img8
Scrap Import in India

India’s appetite for steel is growing, at 60.6 kg per capita compared to over 400 kg per capita in the developed nations. Numerous urban/rural infrastructure projects undertaken by the government and private sectors are central to the demand for steel. Secondary steel contributes 50% share to the Indian steel industry. Ferrous scrap being one of the key raw materials for the secondary steel manufacturing units,

India’s scrap requirement for steelmaking is about 16-18 mnt pa. Of this requirement, about 1/3rd of the material is imported. Scrap import in India has seen a steady increase in the past few years. FY16 scrap import in India stands at 6.2 mnt, a 12.7% increase from 5.5 mnt of the material imported in FY15.

With Make in India campaign eyeing 300 mnt steel capacity, the requirement of raw materials is bound to increase. Given the current market for scrap in India, the addition of indigenous scrap from auto-shredding will put Indian manufacturers in a position of advantage. India recently saw its 18th shipment of bulk scrap in 2016. The demand for the raw material is consistently growing.

cover-story_img7

When we took this up with Mr Tripathi, he said, “Shredding of automobiles and white goods will increase scrap availability in the country, which is the need of the hour since India’s demand for steel is expected to grow in the coming years. As such, while import of scrap will continue, enhanced domestic availability will do good to the steel industry.”

Similarly, Mr Sanjay Mehta on the scope and impact of auto shredding in India said, “Building auto shredding plant in India is a very constructive step towards organized dismantling of automobiles and scrap generation. The process of the metal recycling industry will be streamlined and become more environment friendly. It will increase availability of scrap in the country, which will help the Indian steel industry.”

cover-story_img9

CHALLENGES

While the auto-shredding industry in India looks utterly promising with the number of cars and added monetary benefits for the economy, undertaking the task of establishing the industry from scratch will not come without challenges. In a candid conversation with Steel 360, Captain Mohan Ram, SIAM highlights the need to carefully analyze every aspect of the ambitious project. According to him, shredding must be centered on automobiles which yield low carbon, high quality alloy steel, which when segregated properly will give much higher value per tonne than mild steel. Upon import of junk cars for shredding India, Captain Ram says that SIAM is totally opposed to importing junk cars into India, as the residue will require landfills and create a lot of avoidable costs and strains. It will be a retrograde step for our environment.

An excerpt of the interview is below.

Dismantling Units

It is generally seen that world over, shredders begin to be set up only when ELVs cross about a million. Also, prior to setting up the shredding unit, the government needs to set up dismantling units. The bulk of steel recovered after dismantling the vehicles and removing the useful parts and toxic substances, will then be sent to shredding units. According to SIAM, India needs about 400-500 dismantling units in highly car populated areas such as Tamil Nadu, Karnataka, Maharashtra, Punjab, Haryana, Gujarat etc. MRAI, working with SIAM and Ministry of Heavy industries should be put up for this task. The private investors in this industry should be given tax incentives such as duty free import of shredders, easy term loans and tax holidays for first few years.

Logistics

The logistics cost of moving steel from various collection centers to the shredding unit can become prohibitive. India needs large number of medium/small shredders serving local areas. Typically a shredder serves 20-30 recycling units and is located close to areas where finished products are made to control the logistics cost.

Power and Feed

Shredders are expensive machines and require a lot of electric power. To be viable in India, a shredder must run 2-3 shifts a day, 7 days a week. Shredders need a lot of steel to be viable to operate. The government should give higher priority to setting up dismantling units. Setting up a shredding unit without assuring supply of scrap will make this business commercially non-viable. It should be economical to transport the ELVs to the unit. If it is an 8 tonne unit, working 15 hours a day will need 250 cars/day; 6,000 cars/month; 72,000 cars per annum.

Participation from Private Units

While MSTC’s move is a good initiative, channelizing all scrap development through MSTC alone may not be a good idea. Participation from private sector should be encouraged. A mix of private and public sector working in competition will be more efficient.

In the end, amid all promises and challenges, the vehicle recycling industry in India represents a huge potential for scrap generation. Scrap use in steelmaking will contribute to circular economy of steel. India, being a developing country, needs to tap into such green, sustainable industries for long term benefits. Building any industry from scratch is a daunting task and must face various challenges before reaching sustainability. For any nation, the role of its citizens is crucial when an undertaking of such scale is put to work. While the government can take this initiative and develop the industry, a big part of the responsibility also lies on the citizens of the country who need to make conscious efforts towards preserving the environment by surrendering their old vehicles.

Source: Steel 360 Magazine JUly’16 Issue