India’s vehicle scrappage policy: Where are the opportunities?

India’s vehicle scrappage policy will offer enormous scope to steel industry players, medium small and micro enterprises and entrepeneurs to set up dismantling centres.

A vehicle’s life spans 14-17 years with an active life (used actively with original parts) of 5-6 years, a passive period (used by replacing spares): of 7-8 years and finally the storage period (not used, kept standing) of 2-3 years.

Speaking at a webinar on ‘The Indian auto recycling industry: Current trends, opportunities and challenges,’ organised recently as part of SteelMint Engage, Yogesh Bedi, Chief, Steel Recycling Business, Tata Steel, emphasising on the sustainability factor, said the vehicle scrappage policy “is completing the circular economy loop”.

Where are the opportunities?

• Growing number of ELV vehicles: Around 90 lakh vehicles are ready for dismantling in CY’21 and by CY’25, the end-of-life (ELV) stage would rise to 2.8 million, said Bedi, adding that these centres undertake activities like de-pollution and dismantling, bundling and logging shells, shredding steel scrap and ultimately the material is sourced by EAFs and IFs for melting scrap for steel-making. There is potential for INR 4.5 crore of direct revenue generation per month.
• Delhi NCR opportunities: The northern region is the biggest hub, comprising 40% of the ELV market. Delhi NCR has the highest vehicle population density at 5 lakh /sq km and over 20 lakh vehicles older than 15 years are in the capital which could offer scope for setting up centres in the north in the near term. The current dismantling infrastructure has the capacity to cater to less than 2% of ELVs.
• Govt mulls recycling zones: The scrappage policy also includes plans to set up recycling zones which are common facilities for promoting green industry that could include copper, aluminium, battery, e-waste etc. The purpose is a self-sustaining ecosystem where the byproducts/wastes of one industry becomes the raw/input material of another.

“In this carbon-conscious world where carbon emissions are a big no and climate change is of concern, recycling is going to be important. Any opportunity related to recycling should be considered as going forward. Scrap is becoming an important future raw materal,” Bedi emphasised.

• Revenue potential: Recycling creates INR 43,000 crore in direct revenue potential, INR 30,000 crore of forex savings (older and polluting vehicles consume more fuel which adds to the oil bill), 2 mntpa of ferrous and non-ferrous scrap available, over 500 AVSF and 100-plus testing centre opportunities.
• Value drivers: Dismantling centres will offer value drivers for authorised dismantlers. These include higher cross-sales, potential leads, incentives from OEMs, direct souring tie-ups and precious metal recovery scope (catalytic converters go to Belgium and Japan for recovery of precious metals).
  For customers, benefits include transparent pricing, road tax rebate of 15-25% and a registration fee waiver. “Customers must be aware of the life-cycle cost,” Bedi insisted.
• Scope for more scrap generation: A unit would dismantle 1,000-1,500 vehicles per month and generate 1,000 tonnes of ferrous and 100 t of non-ferrous scrap per month. Setting up a centre would loosely entail an investment of around INR 10 crore and about 5 acres of land with potential for INR 4.5 crore of direct revenue generation per month.

Outlook
Currently 9 million polluting vehicles are to said to have met EOL and if we are to remove these from roads, and assuming at least 10% of the vehicles are replaced with electrical vehicles, (EVs) then recycling will lead to 4.5 billion kg of resources conserved, 3.6 billion kg of carbon dioxide reduction, and 10 billion litres of fossil fuel conserved amongst others.

“It is a sustainability initiative with far-reaching implications,” Bedi said.

Where dismantling centres are concerned, “Spare parts recovery and vehicle refurbishment are to be value drivers in the short run while material recovery and strategic tie-ups with shredding units will be value drivers in the long run,” Bedi concluded.