India’s newly announced, scrappage policy, has been termed as the Big Bang policy change by industry experts. In a webinar held by the Society of Indian Automobile Manufacturers (SIAM) on Aug 18, scrappage policy was discussed at length, including, the benefits and the challenges attached to the scrappage policy.
Scrap generation
End of Life Vehicles (ELV) will generate several types of scrap which will be collected in an eco-friendly way. From one vehicle, around 70pc scrap is ferrous, 7-9pc is non-ferrous and the rest is rubber, glass, plastic, etc. Around 70 auto scrappage centers will be constructed in the next five years.
Availability of scrap will increase and address the persistent shortage of material in India. OEMs’ input costs should go down by 30-40pc. India is a huge importer of ferrous scrap, however, imports should drop as scrap generation from old vehicles increases in the country.
There are over 10mn old vehicles in India, which lack fitness certificates and can be scrapped. It will greatly improve road & vehicle safety, environment, fuel efficiency and boost auto sector sales by 30pc, says Amit Varadan, Joint Secretary, Ministry of Road Transport & Highways.
From April 1, 2023, the heavy commercial vehicles will be mandated to undergo tests at an authorized fitness testing center while the rest of the commercial vehicles will be authorized to undergo tests from Aug 1, 2023. SIAM has proposed 70- 100 fitness testing centers would be set up all over the country.
Battery recycling
With limited battery recycling facilities and the increase in the sales of EVs, there would be enormous lead battery wastage, but the recently announced policy will create an online and offline market for recycling and sale of certified use of parts, says MS Anand Kumar, Co-Chairman, SIAM Recycling & Material Group and GM, TVS Motor Co.
Benefits of scrappage policy
Apart from scrap generation, the replacement of old commercial vehicles will result in reduced fuel bills and will help in reducing pollution, says Som Kapoor, Partner (Automotive Sector), Ernst & Young. Meenakshi Sundaram, CTO, Amalgamations Component Group, added that adopting a circular economy by recycling and re-using automotive parts will lead to the creation of an estimated $8-10bn economy.
Potential challenges
Currently, most of the auto scrappage centers fall under the unorganized sector. This is a major hurdle for the upcoming organized sector. The Metal Scrap Trading Corporation is advised to collect old vehicles which can turn this unorganized sector into organized. Both the parties can be complementary to each other, rather than being competitive.
Masaru Akaishi, MD, Maruti Suzuki Toyotsu India, explained the challenges of ELV generation, collection, dismantling and material sales. He pointed out that regulations should make all players follow proper systems. He stressed upon the role of incentives and disincentives to encourage the ELV user to dispose old car and take it to authorized dismantlers. The domestic steel scrap generation will replace the requirement for imported scrap and save resources.
Co-existence of informal & formal sector was highlighted and informed that multiple opportunities exists for private players to make the Indian Scrappage industry organized, transparent and environmentally friendly. Government has to play a huge role in bringing both the sectors together and skill development has to be imparted for the efficient ways of dismantling vehicles in an eco-friendly way.