SCRAPPAGE POLICY
We
all use automobiles , some may be old or new, what are we going to do with the
old vehicles ? Whether we are getting cash benefits for them? we can see a huge
majority getting unused and wastage .,think about it
An average car owner rarely gets any value for his old vehicle. Moreover,
according to a Central Pollution Control Board (CPCB) study, there are about
nine million vehicles plying on Indian roads that are more than 15-years old
and often emit 10 times more tailpipe emission than the current norms. Even
though the recent BS-VI emission norms are expected to lead the greenway, this
number is anticipated to reach 20 million by as early as 2025.
Now, imagine you get anywhere around Rs 15,000 to Rs 25,000 for simply scraping
or recycling your old vehicle. Any make. What would you prefer?
As
more and more vehicles will be scrapped and eventually recycled, customer
ownership will get a breather, thereby contributing to new car purchases amid a
host of challenges waiting to grip the industry post lockdown.
Scrappage is the process in which ELV (End of Life Vehicle) is disposed off. This may be
done using shredders that tear them down into tiny pieces of metal which can
then be recycled too. Other non-metal parts of the vehicle are then disposed
off in a sustainable process.
As more vehicles will be scrapped & recycled, customer
ownership will get a breather, contributing to new car purchases.~
Considering
the impact of recent coronavirus pandemic and its effect on the overall industry, which has already witnessed a
prolonged decline in demand, scrappage policy is seen as a saviour in sight,
expected to emerge swiftly in reviving the auto sector out of its worst slump
in the last 20 years. As more and more vehicles will be scrapped and eventually
recycled, customer ownership will get a breather, thereby contributing to new
car purchases amid a host of challenges waiting to grip the industry post
lockdown. In its basic essence, the policy can bring in a three-way advantage
for the country, encompassing environmental benefits, economic growth with
demand creation and job opportunities - both in the automobile sector with its
growth, as well as with the establishment of new scrapping centres in the
country.Studies also say that scrappage can take 28 million polluting vehicles
(mainly two-wheelers) off the roads, helping curb pollution in a massive way.
Implementing the scheme for trucks and buses can bring down CO emissions by 17
percent, HC+NOx emissions by 18 percent and PM emissions by 24 percent.
Another associated benefit to the policy is that raw materials such as steel,
copper, aluminium can be obtained from these scrapped vehicles and reused in
the manufacturing of new ones. Mitigating the gap between supply and demand,
this will in turn reduce the need for fresh mineral resources and the mining
activities associated with obtaining them.
Nitin Gadkari, Road Transport and Highways
Minister had also mentioned that the Kandla port in India could be used as a
base to get in old vehicles from outside India and scrap them here. This, he
said, will reduce our dependence for metals and at the same time will also
ensure recycling of materials.
According to ETAuto research, automotive steel alone accounts for around 12
percent of the total steel consumption in the country, albeit the country's
steel imports are estimated at around 6 million tonnes a year. So, this will
mean not only saving on imports but also cutting down largely on the energy
required for production of new steel.
Meanwhile, the steel that is recovered is not the end-product but shredded
material. It goes back again to be made into steel, eliminating the raw
materials needed to make new steel.
As of now, there is just one organised vehicle scrappage facility in India in
Greater Noida. However, there are numerous smaller and informal units that
cater to a major chunk of vehicles.
Domination of unorganised sector
Vehicle scrappage has occupied the pockets of unorganised sector in India for
the longest time. With availability of cheap vehicle parts, Delhi’s Mayapuri is
home to the largest scrap market in Asia. This popularity is also enjoyed by
similar markets of Kurla in Mumbai, Shivajinagar in Bengaluru and Pudupet in Chennai.It
may be noted that the scrap market at Mayapuri, which is more like the funeral
ground for the vehicles, has been so in demand that its annual turnover is
estimated to be around Rs 6,000 crore. Even though there are no statistics
available for the number of people employed in the market, CPCB estimates that
currently, about 3,000 shops operate in the area.
However, with no rules and regulations in place, scrap dealers in these places
are highly profit-driven. The process and condition the scrap manually, openly
disposing off the waste products.
“Car batteries from the vehicles are not carefully handled, and the acid often
ends up leaking out. While the practices in these places are unsafe for the
environment, the detrimental effects can also be seen in the workers’ health,”
conveyed a local.
As of now, there is just one organised vehicle scrappage facility in India in
Greater Noida. However, there are numerous smaller and informal units that
cater to a major chunk of vehicles.
The
value offered for the vehicle to be scrapped depends on certain parameters
including parts, type and vehicle condition.
Opportunities galore for corporates, organised sector
As of now, two organised sector players already have their ventures- CERO by
Mahindra & Mahindra, and Maruti Suzuki Toyotsu India, a JV between Maruti Suzuki and Toyota
Tsusho.
Setup in December 2018, CERO is India's first authorised recycler for motor
vehicles through a joint venture between Mahindra Accelo, a fully-owned
subsidiary of M&M and MSTC (a government of India enterprise under Ministry
of Steel).
Bone of contention remains if the incentives will be offered by
OEMs, state governments or the centre.~
With
a recycling facility set up in Noida, its automated plant collects, depollutes
and dismantles end-of-life vehicles, with the capacity to recycle old trucks,
buses, cars, two-wheelers and three-wheelers.Once the vehicle meets the
requirements of a quality check, it is towed to the recycling facility, where
steel and other useful materials are taken out. After scrapping the vehicle,
its owner is provided a Certificate of Destruction.The value offered for the
vehicle to be scrapped depends on certain parameters including parts, type and
vehicle condition. There are four things for recovery from the scrap, namely
steel, batteries, plastics and other parts.Reportedly, Mahindra and Mahindra
will be setting up many more such authorised scrappage centres in India by
2022.As for Maruti Suzuki, the automaker will hold 50 percent stake in MSTI,
while Toyota Tsusho Group companies—Toyota Tsusho Corporation and Toyota Tsusho
India Pvt Ltd—will own the rest.Their first vehicle dismantling and recycling
unit is expected in Noida, Uttar Pradesh, by 2020-21. Maruti Suzuki Toyotsu
India will source vehicles from dealers as well as directly from customers.“Toyota
Tsusho has started ELV recycling since the 1970s in Japan. We believe that we
will be able to contribute to Indian society through our knowledge and experience
for ELV business. The first vehicle dismantling and recycling unit of MSTI is
just the initial step and we are eager to expand to the pan-India base with
Maruti Suzuki,” Naoji Saito, CEO (Metal Division), Toyota Tsusho Corporation
had earlier said.As per the reports, Tata Motors is another automaker gearing
up on similar lines by assessing the ELV and waiting for the defined
guidelines.
Challenges await
For the policy to see the light of the day, cut-off age for scrapping the
vehicle needs to be defined.Industry experts believe that age limit of the
vehicle shall be segment-specific. For instance, commercial vehicles cannot
have a higher cut-off age than personal cars. Also, the kilometre-based
criterion will not work in India because odometers can easily be
manipulated.What will, however, push the scrappage policy is an underlying
program incentivised by the government to replace old vehicles with new ones.
These can be in terms of tax concessions for new vehicles or encouragement in
the form of discounts for buyers who scrap their old vehicles, said a senior
executive.If easy financing and tax incentives are not offered, it will be
highly difficult for transporters (truckers) and state government (buses) to
buy new vehicles, opined the industry veteran.
Easy financing from banks/NBFCs or the government will also help take the
development forward.Yet, the bone of contention remains if the incentives will
be offered by the OEMs, state governments or the Centre, which will eventually
define the road to success of the much-awaited policy.With that, considering
the policy will be in the nascent stage, educating the customer on the need to
recycle their old vehicle can be a hurdle.Setting up scrap yards can easily
take more than a year, even for large corporates, say experts.Next, for the
scrap dealers, high cost of investment and sourcing the right technology is
really important to not succumb to the ways of the unorganised sector and
refrain from exposing the workers to health hazards.
Critics also say that the policy will create a shortage of used vehicles,
increasing their prices and harming income earners.We must note that even
though the policy has been the talk of the town since 2015, the government has
yet again missed the deadline. The recent pandemic may be blamed for the
current delay.In October 2019, draft guidelines on Authorised Vehicle Scrappage
Facility (AVSF) released by the Ministry of Road Transport and Highway (MoRTH)
detailed the infrastructure requirement and the procedure, streamlining the
process for entities interested in entering this business.
As per the guidelines, scrapping centres will only be allowed to set up in
industrial areas and not in busy, residential areas. Moreover, permission from
the state transport department will be required for the scrapping centre and
the owner will need to furnish earnest money deposit (EMD), proposed to be
between Rs 10 lakh to Rs 1 crore, to state governments.In February 2020, Nitin
Gadkari, Road Transport and Highways Minister firmly mentioned that the
long-delayed vehicle
scrappage policy was
in its last lap and will be finalized soon. “I have cleared it from my
end," he said.Again, Nirmala Sitharaman, Finance Minister had also assured
that several rounds of inter-ministerial consultation pertaining to the
scrappage policy has already been done and it is close to finalization.Globally,
vehicles are usually scrapped within five to six years of usage. As a result,
vehicles are not used as much and the parts can easily be employed for other
vehicles thereby enabling proper recycling and less dependence on earth metals.Germany's
auto industry too is stepping up calls for another scrappage program to revive
demand after the coronavirus crisis as Volkswagen and Daimler gradually restart
output in European factories this week.
It must also be noted that the scrappage policy ideates in India from Cash for
Clunkers, as we know it. The scheme was a U.S. government program that provided
financial incentives to car owners to trade in their old vehicles and buy more
fuel-efficient vehicles. The program ended in November 2009, eventually
contributing in stimulating the economy and reducing pollution.
COURTSY : Economic times Auto
