To reduce air pollution, the Indian government, following a series of other efforts, has issued a ban on the sale and registration of new vehicles not complying with emissions standards. These efforts are stimulating private sector investment in auto shredded plants, which has the potential to reduce Indian scrap imports in the near-term by over 30% compared to 2016.
Vehicle recycling currently lacks regulation in India
Recycling of scrapped vehicles in India has historically been a highly unorganised due to there being lack of regulation and a uniform process for the disposal of vehicles. People generally tend to dump end-of life or heavily damaged vehicles at scrap yards for a nominal fee. Scrap processors then strip these vehicles of scrap metal and functional component parts and sell these separately in rather opaque regional retail markets. Additionally, in India the average age of end-of-life vehicles is over 15 years, much higher than the 12 years in other regional markets, and is primarily due to three factors:
Regulation is expanding to incentivise recycling
Currently, India has no regulation regarding the disposal of end-of-life or highly polluting vehicles. However, there have been some encouraging developments over the past year:
Greater recycling may reduce India’s reliance in steel scrap imports
Considering only the upcoming Voluntary Vehicle Fleet Modernisation Programme (VVFMP), industry estimates indicate there are approximately 24 to 25 million vehicles on Indian roads that were purchased before April 2005 that could be scrapped. This estimate considers the average end-of-life age for a commercial vehicle to be 17-18 years and that of a passenger vehicle to be 14-15 years. Conservatively assuming about 10% of these vehicle owners take advantage of the VVFMP during its first year of implementation means that about 2.5 million vehicles would be available to be scrapped. Further, assuming an average vehicle (inclusive of commercial and passenger) weighs about 1100 kg, of which ~65% is steel scrap, about 1.8 Mt of steel scrap will be generated during the first year of the programme.
This would mean India’s net imports of steel scrap, which were 5.6 Mt in 2016 according to Indian government trade statistics, could fall by over 32% compared to 2016 during the first year of implementation of VVFMP policy. Further ahead, auto-shredding scrap has the potential of substantially reducing India’s dependence on imported shredded scrap, particularly as the policy gains traction and the government becomes more insistent in phasing out old and/or polluting vehicles and when emission standards move from BS-IV to BS-VI in 2020.Explore this topic with CRU
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