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India’s scrappage scheme and the effects on the auto recycling industry

Auto Recycling World spoke to Amar Singh, Secretary-General of Material Recycling Association of India (MRAI), to discuss India’s upcoming vehicle scrappage scheme and the effects it will have on the auto recycling industry.


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Material Recycling Association of India (MRAI) is the apex National Association of  India, representing the interest of the recycling industry with over 1200 members, including most Regional Trade/Product Associations.

MRAI’s collective strength of over 20,000 small, medium and large enterprises, directly and indirectly employs 25 lakh1[1] people. It also represents secondary steel, which accounts for nearly 55-60% of the total of India’s production.

India’s vehicle scrappage policy to focus more on demand-supply of metal  scrap

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Amar Singh

The efficient use of scrap for steel production becomes crucial for India as a 35-40% share has been envisaged from scrap-based steel production in the journey of 300 million tonnes per annum (TPA) by 2030. India’s Ministry of Steel’s endeavour is to develop a globally competitive steel industry by adopting state of the art environment-friendly technologies. Ferrous Scrap being the primary raw material for EAF/IF based steel production.

This policy framework will ensure scientific processing and gradually convert the unorganised market into an organised one. Vehicle scrappage has occupied the pockets of the unorganised sector in India for a long time with the availability of cheap vehicle parts. Therefore, this policy framework will provide the standard guidelines for collection, dismantling and shredding activities in an organised, safe, and environmentally sound manner.

Could you let us know more about India’s long-awaited Vehicle Scrappage Policy guidelines and its present status?

India’s vehicle scrappage policy will be executed very soon which is waiting for Cabinet approval. The aim of this policy is to ensure the older vehicles of more than 15 years are off the road and replaced with new vehicles which will boost the demand for the automobile.

Simultaneously, it aims to achieve the target for reduction in emissions and betterment of average fuel efficiency. India is grappling with deteriorating air quality and with a tepid new auto sales decline since the fiscal year ended in March 2019. Therefore, a comprehensive scrappage policy has the potential to address the above issues of sluggish volumes of automobile growth and pollution together.

It will promote the circular economy in the steel sector and scientific collection, dismantling and processing activities for end of life products that are sources of recyclable (ferrous, nonferrous and other non-metallic) scraps which will lead to resource conservation and energy savings and setting up an environmentally sound management system for handling ferrous scrap.

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Source: SIAM, ICICI Securities

On July 26, 2019, the Ministry of Road Transport and Highways (MoRTH) had proposed the amendments to motor vehicle rules to allow scrapping of vehicles older than 15 years in a bid to spur adoption of electrical vehicles to minimise the pollution and enhance the automobile production in India. It is also aiming to minimise India’s dependency on import of scrap metal like steel copper and aluminium which is not available in good quality or quantity in the domestic market.

Dismantling of old vehicles would also help minimise the air pollution and the government’s oil bill, as the new vehicles replacing the old ones would be more fuel-efficient.

With a country like India, could you provide some figures to understand the magnitude of such a scheme and the task that lies ahead?

India’s scrappage policy is set to focus on the commercial vehicle (CV) segment and target the healthy replacement of the older, polluting fleet – thus boosting the automobile sector. This sector has borne the brunt of the slowdown over the past 24 months owing to a confluence of structural (idle capacity, slow economic activity) and cyclical (high installed base) issues.

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Source: MoRTH, ICICI Securities

Overall, it’s estimated to be an opportunity of Rs1.2 lakh crore, targeting almost 60 lakh old vehicles which indicate 7-8% healthy growth for the industry across segments for at least three years.

What is the present situation and process when it comes to vehicle recycling in India? 

India’s Ministry of Road Transport and Highways (MoRTH) has formulated a note for the Cabinet on the creation of an ecosystem for voluntary and environmentally friendly ways to phase out unfit and old polluting vehicles.

Shri V.K. Singh, Minister of State for Road Transport and Highways, mentioned recently in the Rajya Sabha that the Centre is close to finalising the policy and that a cabinet note for development of an ecosystem for voluntarily phasing out unfit and old vehicles in an environmentally-friendly manner has been prepared.

The proposed policy, once approved, will be applicable on all vehicles as the government discussed previously. The policy has been sent for a fresh round of consultation with stakeholders on the direction of the PMO.

What effect will the scrappage scheme have on these businesses?

With the successful implementation of the Vehicle Scrappage Policy, India could emerge as a hub for automobile manufacturing as key raw material available from scrapping steel, aluminium and plastic are bound to be recycled, bringing down automobile prices by 20-30 per cent.

This will also generate fresh employment and trigger economic growth, and also act as a critical factor to revive the automobile market that has been hit by a prolonged slowdown.

The automobile industry wants the policy to cover all segments, including cars and two-wheelers and not just commercial vehicles, to create a significant scale for new players to participate in this new market. Also suggested was to cut the life period for commercial vehicles to 10 years from the currently proposed 15 years.

What measure do you presume will be put in place to encourage people to adopt the scrappage scheme?

There are two critical factors the government needs to do to promote the scrappage scheme:

  1. Offer sizeable financial incentives
  2. Develop a resale market for the scrappage certificate for those who do not want to replace their scrapped vehicles with new vehicles.

Whereas the HDFC Bank study has estimated that the market for vehicle scrappage and recycling at $6 billion. If the policy is defined well, 9 million vehicles could be off the roads by fiscal 2021 and 28 million by 2025, largely comprising two-wheelers.

It would reduce carbon dioxide emission by 17% and cut particulate matter in the air by 24%. Also, if half the Bharat Stage-II and III vehicles come off the roads, it would save 8 million tonnes of oil a year.

Such a comprehensive scrappage policy will result in the reduction of costs, save the foreign exchange and increase revenue in the long term.

From the automobile manufacturer’s point of view, recycled metals would be available at a cheaper rate, and the government could save forex because of lower imports of these raw materials as well as get tax revenue from new vehicle sales. Apart from $6 billion in steel scrappage potential, there is additional business that can be generated from the recycling of plastic, rubber and other body parts.

With the expected increase in scrap production, what effect do you think this will have on the steel industry in India and potentially, on the world market?

Steel material is playing an important role in the circular economy as it can be used, reused, and recycled infinitely. It encourages the reuse and recycling of materials, which are all fundamental advantages of using steel.

It also plays an important role in the resource efficiency as its main product i.e. Steel can be recycled even after its end of life into usable products as well as other waste or by-products developed during the production of steel; known as slag or flue gases, which can be used in several applications. The use of every tonne of scrap shall save 1.1 tonnes of iron ore, 630 kg of coking coal and 55 kg of limestone. There shall be a considerable saving in specific energy consumption by 16-17% in comparison to primary scrap. It also reduces water consumption and GHG emission by 40% and 58% respectively.

As a result, steel is the most recycled material in the world. Over 650 million mt of steel are recycled annually, including pre and post-consumer scrap. Most of the major steel-producing countries like Japan, USA, and China are continuously increasing scrap-based steel production with a proportionate reduction from the primary route.

Similarly, the efficient use of scrap for steel production becomes crucial for India as 35-40% share has been envisaged from scrap-based steel production in the journey of 300 million TPA by 2030.

In addition, this policy will bridge the gap between demand and supply of scrap in the future and the country may be self-sufficient by 2030. This is mainly because with the increase in consumption of steel in the recent past and ELVs, the generation of scrap is likely to be increased considerably. This scrap must be channelised so that the same can be utilised for steel production in an environmentally friendly manner.

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Apart from the positive effect it will have to the environment, what other benefits do you think it will bring? Especially when looking at the development of the Indian vehicle recycling industry?

The Greenpeace and AirVisual 2019 study report indicates that India accounts for seven of the world’s ten cities with the worst air pollution. India accounted for 22 of the 30 most air-polluted cities in the world.

The Government of India has been exploring ways to address this problem, with the rolling out the scrappage policy as the latest measure in that direction.

Besides, India is rapidly approaching the transition to BS-VI emission norms. While these norms would help to reduce future emissions, scrapping older vehicles in tandem with the transition would actively reduce the fleet of the worst polluters.

Industry also estimates that there is scope for more than 90% improvement in nitrogen oxides (NOx) and particulate matter (PM) emissions and 2 million tonnes per annum reduction in carbon dioxide emissions, just by taking 50% of BS-II & BS-III trucks off the road.

If you would like to find out more, please visit Visit the MRAI or contact MRAI representatives:

Mr Amar Singh – Secretary General – – Mobile: +91 9004346455

Mr Pramod Shinde – Head Communication – Mobile: +91 9930629739

Mr Sufiyan Ansari – Media & Event Coordinator – – Mobile: +91 9833190176

[1] Lakh – (in India and Pakistan) the number 100 000, especially when referring to this sum of rupees