How will vehicle scrappage policy boost domestic scrap generation? BigMint explores

• With 327 million registered vehicles, ELV recycling potential huge
  
  
• Estimated ELV volumes in India set to reach 22.5 million
  
  
• Robust regulatory framework needed to boost vehicle scrappage sector
  
  

Morning Brief: India's vehicle scrappage sector stands at a crossroads, offering substantial opportunities while grappling with significant challenges.

As the third-largest automobile manufacturer globally, the Indian automobile sector contributes approximately 7-8% to the nation's GDP, producing around 30 million vehicles annually. With approximately 327 million registered vehicles, the potential for recycling end-of-life vehicles (ELVs) is enormous.

However, to fully leverage this potential and establish a robust scrappage ecosystem, several hurdles must be overcome.

Addressing these challenges is essential for maximising resource recovery, enhancing environmental sustainability, and driving economic growth within the sector.

100,000 vehicles scrapped till June 2024

As per industry sources, the Indian government is looking to improve its vehicle scrappage program amid a lacklustre response from vehicle owners to existing incentives.

The latest updates indicate that officials have initiated a comprehensive inter-ministerial review of the Registered Vehicle Scrapping Facility (RVSF) policy to address ongoing challenges and identify additional benefits to encourage vehicle scrapping.

Currently, registered scrapping centres are facing difficulties attracting owners of old vehicles, as the unorganised sector often offers more favourable terms.

Since the implementation of the scrappage policy in 2021, only 100,000 vehicles have been scrapped as of June this year.

To enhance domestic scrap availability, the government is considering:

• Increasing rebates on registration charges for new vehicles.
  
  
• Offering additional discounts for scrapping certificates.
  
  

Scrap generation overview

India's total domestic scrap generation for FY'25 is estimated at 28 million tonnes (mnt), sourced from various categories. Home scrap accounts for approximately 1.5 mnt, primarily available as traded volume for sale, limiting its overall availability in the market.

Automotive scrap, valued for its premium quality, contributes about 1.3 mnt and is essential for recyclers.

Another flat product scrap generates around 6.2 mnt during fabrication and component manufacturing. Additionally, obsolete scrap includes approximately 6 mnt from households collected by peddlers, 9.5 mnt from construction and demolition activities, 2.5 mnt from ship-breaking and railways, primarily at Alang, and 1 mnt from end-of-life vehicles.

Regional ELV clusters

The volume distribution of ELVs varies by region, with several clusters emerging as significant contributors to scrap:

• NCR (Delhi, Meerut, Jhajjar, Kundli): 25-30%, with markets like Mayapuri (Delhi) and Meerut (UP) as major clusters.
  
  
• Mumbai-Pune Region: 14-18%, dominated by Kurla (Mumbai).
  
  
• Chennai and Coimbatore: 10-15%, with Pudupet (Chennai) as a major center.
  
  
• Bangalore: 10-12%, represented by the Rusel market
  
  
• Kolkata-Jamshedpur: 6-9%, with Mallick Bazar (Kolkata) as a notable area.
  
  
• Others: 40-50%, including Transport Nagar (Indore) and Jhajjar (Haryana).
  
  

Challenges in ELV sector

There lies an untapped potential in India's ELV sector, while there are also pressing challenges that impede its growth.

The lack of modern recycling infrastructure and standardisation has resulted in inefficient dismantling processes hampering the sector's efficiency. Additionally, the absence of a centralised database for pricing standards creates a lack of transparency, further complicating the market dynamics.

Manual operations dominate the landscape, thereby driving up operational costs, while unregulated activities exacerbate environmental degradation.

Industry seeks govt support

Addressing these challenges is not just important; it is essential for maximising scrap recovery and enhancing supply chain efficiency. Further, leveraging digital solutions can help us identify and aggregate previously overlooked scrap.

Strong government support is crucial for establishing a robust network of scrap collection and processing facilities.

A strong network of scrap collecting and processing needs strong support from the government. India needs a central body to represent the ELV Recycling and Vehicle Scrappage Facility (RVSF) networks to the government.

Adopting technologies and installing dismantlers or shredders is a high-capex business. Currently, there is no incentive package for setting up RVSFs.

Govt support & future direction

To improve the ELV sector, the Indian government is focusing on:

• Increasing incentives: Enhancing rebates and discounts for scrapping old vehicles.
  
  
• Improving recycling infrastructure: Investing in modern facilities and mechanised processes.
  
  
• Enhancing public awareness: Educating vehicle owners on the benefits of scrappage programmes.
  
  
• Developing a comprehensive database: Creating a centralised system for tracking recycling processes and pricing.
  
  

Potential from ELVs by 2025

The estimated volumes of End-of-Life Vehicles (ELVs) in India will reach 22.5 million, comprising 81% two-wheelers, 13% cars, 3% three-wheelers, and 3% heavy commercial vehicles (HCV).

Each vehicle generates an average of 300 kg of steel scrap, resulting in a potential total of approximately 6 million tonnes (mnt) of steel scrap from ELVs. However, the actual collection is currently much lower.

Rohit Agrawal of JSW Steel commented: "The potential of India's End-of-Life Vehicle (ELV) sector is substantial. With around 30 million vehicles produced annually, each containing about 300 kg of steel, we're looking at an estimated 9 million tonnes of steel--more than our current imports."

"In the past three years, 118 recycling and Vehicle Scrappage Facilities (RVSFs) have been set up out of which around 62 are operational, but their capacity utilisation is low."

"Recent discussions on the Extended Producer Responsibility (EPR) policy suggest that 8% of vehicles introduced into the market 20 years ago should be recycled. If implemented, this could generate an additional 200,000 to 300,000 tonnes of scrap, marking a crucial step toward enhancing India's recycling capabilities."

Way forward

As highlighted by Agrawal, during his presentation at BigMint's Future.Steel Conference held in Chandigarh, Punjab, on 25 September 2024, the vehicle scrappage sector represents a significant opportunity for both economic growth and environmental sustainability. He emphasised the need for structured approaches to tackle the existing challenges and enhance the recycling ecosystem in India.