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The Indian vehicle scrappage policy – an economic opportunity needing a scientific approach to succeed

Dr Deb Mukherji PhD., Managing Director of Anglian Omega, based in India, provides his opinion on how he believes there is an economic opportunity in the Indian vehicle scrappage policy.

 

The Indian vehicle scrappage policy - an economic opportunity needing a scientific approach to succeed p
Dr Deb Mukherji PhD.

The Indian Government recently introduced a policy, with an intent to recycle old vehicles.

Under India’s forthcoming voluntary vehicle scrappage policy, private vehicles over 20 years old will have to undergo fitness tests and commercial vehicles over 15 years old will also have to face these tests. This could be a game-changer for the Indian automotive industry, which produces 20 million two-wheelers, three million cars and two million commercial vehicles a year.

At the moment, India does not have an established system of end-of-life treatment for vehicle scrapping or recycling. And a large number of these vehicles change ownership on an average of three times during their life, and subsequently end up in unorganised scrap yards, landfills or simply dumped in garbage dumps. This creates severe environmental hazards besides creating enormous pressure on cities like Delhi, Mumbai, Bangalore that are bursting at the seams due to ever-expanding population requirements.

According to Govt. data, India’s urban population of 429 million citizens produces a whopping 62 million tonnes of garbage every year. A staggering forty-three million tonnes of solid waste is collected annually. Only 11.9 million 22-28%) is treated, and the rest is left untreated and dumped at landfill sites. Organised vehicle scrapping has been attempted to solve a portion of these unorganised scrap yards.

Vehicle recycling is a highly technical process. At the end of life, vehicles need to be collected and sent to recycling facilities. The recycling process involves draining oil, fluids etc. and disposing of these. The steel body shell is crushed and formed into pallets and sent to foundries. Aluminium and other non-ferrous retrieved from engine and powertrains are sent separately to the smelting shops. Rubber, plastics and electric wires are also dealt with in similar ways. Data shows almost 95% of steel and aluminium metals can be reclaimed from vehicles using proper recycling facilities. To manage such complete recycling processes, an end to end supply chain needs to be put in place, that is managed by a high level IT system. Finally, after reclaiming, the materials need to be fed back into the system consisting of many suppliers and finally, it would reach back to the OEM: this would be an ideal circular economy which would consist of recyclers, smelters, parts suppliers and carmakers.

Economists have generally agreed on taxing the environmentally polluting countries as a driver to switch to environmentally friendly processes. Govt. has proposed levying a “Green Tax” on vehicles older than eight years with owners shelling out an additional 10-15% on road tax in the new scrappage policy. The policy promotes sales of new vehicles, which have improved fuel efficiency and low pollution levels. For a country like India, which imports USD 120 billion of oil and melting scrap of 9 Mil MT annually, vehicle recycling will feed new efficient vehicles in the system leading to an opportunity to save on imports. India expects to scrap around 10 million vehicles immediately, once the scrappage policy is implemented. This will lead to the creation of around 50,000 jobs with investments of around USD 2 billion in the recycling industry. Eventually, within 5 years, the industry is expected to make USD6 billion in revenue annually. Apart from steel and aluminium, expensive rare earth materials like titanium, vanadium, palladium for example, which are part of catalytic converters, only add to this business opportunity.

It is extremely important to set the complete recycling chain in place to make the scrappage policy successful. Vehicle scrapping should not be the only intent; we need to recycle and reclaim as much as possible from end-of-life vehicles to ease pressure on the entire ecosystem.

Electric vehicles (EVs) are expected to replace internal combustion (IC) engine vehicles rapidly in India as well as globally. These present a new set of challenges as well as the opportunity for the recycling industry. Li-Ion batteries have a second life once their useful life in vehicles is over, with around 70% charge left in them. These will find use in stationary energy generation usage, home inverters, industrial generators etc. The motors and electronics items can be part of a new remanufacturing industry where these could be reused. Their product design will play a major role here with new-age robust designs that will outlast the life of the vehicle.

Car making is a high energy and material intensive industry in itself. Research data shows you need 5.23 Kg of material to produce a car of 1 Kg, with an energy spend of 41.8MJ/Kg of energy, with almost 68% of this energy going into mining and metal production activities which are an indirect part of the auto supply chain. This is a colossal amount of material and energy spend considering a yearly production of almost 70 million cars and another 25 million trucks globally. With recycling, to some extent, we can correct this energy imbalance.

The scientific recycling approach has a big impact on society. It’s a force multiplier with thousands of direct and indirect employment as part of the supply chain. It has a positive impact on the environment, safety and clean living of a large population. For such an activity to be sustainable, it must be economically attractive and environmentally friendly. It must provide a beneficial service to society safely and responsibly. A self-sustainable system needs to be the target of the scrappage policy as the world faces material shortages, increased costs, economic disruptions and more stringent environmental regulations.

If you would like to get in touch with Dr Mukherji, please email him at deb.mukherji@anglianomega.net  or to find out more about Anglian Omega, visit anglianomega.net

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