India's vehicle scrappage policy picks up pace. What lies ahead?

• 55 scrappage centres set up, 28 operational, more on anvil
  
  
• India's ferrous scrap generation from ELVs may touch 7.30 mnt by FY30.
  
  
• Leading auto players setting up recycling facilities
  
  

Morning Brief: Major automotive players are taking active interest in setting up recycling facilities ever since the Government of India (GoI) implemented the Vehicle Scrappage Policy in April 2022. As per data available with SteelMint, currently 55 Registered Vehicle Scrapping Facilities (RVSF) have been set up across 12 states in the country. Of these, 28 are currently operational while the balance 27 have received approval and will soon be commissioned.

At presnt, two operational OEM-backed facilities include Mahindra CERO (joint venture with MSTC), with a recycling capacity of around 50,000 vehicles per year in Delhi, Pune, and Chennai. The company is planning to expand to over 600,000 units in 25 cities by 2025.

Maruti Suzuki Toyotsu India, a joint venture of Maruti Suzuki and Toyota Tsusho Group, has a capacity to recycle approximately 25,000 vehicles annually in Noida.

Tata Motors has signed MoUs with the Maharashtra and Gujarat governments to establish recycling facilities with capacities of 35,000 and 36,000 vehicles per year, respectively.

What is India's Vehicle Scrappage Policy?

India's Vehicle Scrappage Policy was implemented in April 2022, and aims to eliminate old vehicles, reduce pollution, enhance safety, and boost vehicle sales. Vehicles older than 20 years (passenger) or 15 years (commercial) must pass fitness and emissions tests, or else they will lose registration and will be recommended for scrapping.

Policy incentives

• Scrap value for the old vehicle given by the scrapping centre to be 4-6% of the ex-showroom price of a new vehicle.
  
  
• Concession on motor vehicle tax of up to 25% for non-transport vehicles and up to 15% for transport vehicles.
  
  
• Registration fees to be waived for purchase of new vehicle against the certificate of deposit (CD).
  
  
• Auto OEMs have been advised to provide 5% discount on the purchase of a new vehicle against the certificate of deposit.
  
  

Why the need for a scrappage policy?

Conservation of steel raw material resources: As per a report from The Energy and Resources Institute (Teri), an average passenger car constitutes about 69% of steel of the weight of the vehicle, 16% aluminium, 5% plastic, 4% rubber, and the rest are foam, copper, glass, etc. Thus, steel is the leading metal that is consumed.

However, recycling of vehicular scrap can help in conservation of valuable resources. For instance, recycling one tonne of steel conserves consumption of 1.4 t of iron ore, 740 kg of coal, and 120 kg of limestone.

Addressing environmental issues: Globally, the automobile industry has one of the highest rates of pollution during the manufacturing process and in the post-consumption stages. The percentage share of emissions from the transport sector in total carbon emissions is likely to increase from 13.5% to 19% by 2050 (TERI). The transport sector is the third-highest emitter in India. The average life of a vehicle is considered to be 10-15 years depending on the usage condition. In 2021, the Ministry of Environment, Forest and Climate Change specified that 21.4 million vehicles exist in India that are older than 20 years.

Estimated scrap generation from ELVs

As per SteelMint's estimates, India's ferrous scrap generation from ELVs will touch 5.30 million tonnes by FY2024-25 and 7.30 mnt by FY2029-30. Estimated volumes in FY2022-23 will be around 4.60 mnt. The data includes scrap generation from 2- and 3-wheelers, passenger cars, commercial passenger vehicle, and commercial goods vehicles.

The data is estimated considering the average vehicle life of 15 years and average steel consumption in the automobile sector.

Global practices

Globally, around 40 million ELVs are generated annually, accounting for 4% of total global automobile ownership. Vehicle scrappage policies introduced in 2009 mostly aimed to support the automotive industry, offering cash incentives for replacing ELVs with more fuel-efficient models. Some countries had short-term programmes without age restrictions or obligations to purchase new vehicles.

SteelMint to hold 'recycling' session at upcoming conference in Kolkata

With ferrous scrap poised to become a highly important raw material in the foreseeable future, SteelMint is dedicating an entire session to "How steel recycling is gaining pace in India", at its upcoming conference.

The 3^rd Indian Coal Conference Outlook, 6^th Indian Iron Ore & Pellet Summit and 5^th Indian DRI and Metallics Conference, will be jointly held in Kolkata over 24-26 August, 2023, at JW Marriott Hotel. More than 20 esteemed speakers, and 500-plus delegates will converge under a single roof to deliberate on the key topics of the day.

Don't miss out on the opportunity to interact with the best in the industry and hear from the experts. Register fast.