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Vehicle Scrappage Policy in India: A Massive Supply of Scrap Metals

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by - 4/5/2021 1194 Views

The Union Minister Nitin Gadkari announced the country’s long-awaited "Vehicle Scrappage Policy" in Parliament. The Scrappage Policy eventually boost the availability of low-cost raw materials like steel, aluminum, plastic, rubber, electronics, etc.

Vehicle Scrappage Policy in India

Announcing the “Voluntary Vehicle-Fleet Modernization Programme” in Lok Sabha. Gadkari said that Commercial Vehicles over 15 years old and personal vehicles over 20 years old will be marked for scrapping if they fail to pass the test. “They will be seized and destroyed,” he said. This will be a voluntary process but defined by rules.

The average age of commercial vehicles is over 10 years and the private ones, 10-15 years. India has 17 lakh medium and heavy commercial vehicles that are older than 15 years without any valid fitness certificate, 51 lakh light motor vehicles older than 20 years, and 34 lakh light motor vehicles older than 15 years, the Transport Ministry. These vehicles, according to the minister, are the primary cause of vehicular pollution in our country. However, the Minister further added that scrapping of old vehicles would result in more benefits. This comes in the form of recycling materials like steel, plastic, and copper.

From April 2022, vehicles owned by governments and allied entities like PSUs. In their case, Gadkari said, vehicles over 15 years of age will be mandatorily scrapped, without any consideration of fitness — there are at least 2.37 lakh such vehicles, he said. Vintage cars will be exempted from this policy, Gadkari said, adding that separate guidelines will be formulated to regulate them.

Working Process of New Scrappage Policy

  • Private vehicles older than 20 years and commercial vehicles older than 15 years that fail to pass the fitness test or registration certificate is not renewed. The vehicle will be de-registered.

  • Once a vehicle’s registration certificate expires or if found unfit, registered owners can handover such vehicles to any government-authorized scrapping center.

  • The scrap dealer will issue a “certificate of destruction” against the vehicle and the vehicle owner avail incentive to purchase new vehicle.

  • The Government will maintain a database of the Vehicles scrapped every year.

Benefits of Vehicle Scrappage Policy

  • According to Gadkari, “The Scrappage policy will enable setting up of scrap centers.”  That will benefit car and bike manufacturers as well as component makers.  The Government will encourage setting up of integrated scrapping facilities - Registered Vehicle Scrapping Facility (RVSF), across India.

  • Gadkari said: “The Voluntary Vehicle Fleet Modernization Programme will enable Indian auto industry to take its turnover to ₹10 lakh crore (in a few years) from ₹4.5 lakh crore at present… availability of scrapped material will reduce the cost of auto components by 30-40%.

  • “The fleet modernization programme” aims to achieve multiple goals like reduction in air pollution, the fulfillment of India's climate commitments, improving road and vehicle safety, better fuel efficiency.

  • Scrapping will also reduce the cost of vehicle components, Gadkari said: “Within 5 years, India will become an automobile hub, in the coming times, auto parts will cost less and the government is promoting electric vehicles.”

Incentives for Vehicle owners

  • Scrap Value: Vehicle Owners opting for the scheme will get scrap value of the old vehicle at the scrappage center, which is about 4-6 per cent of the ex-showroom price of new vehicles

  • Tax Rebate:  Vehicle Owners will get a road tax rebate of up to 25 per cent on personal vehicles and up to 15 per cent on commercial vehicles. 

  • Discount on New Vehicles: Vehicle Owners avail 5 per cent manufacturer discount against the scrapping certificate and also a waiver in the registration fee.

Scrap Metals Retrieved in Vehicle Scrapping

Vehicle scrap recycling is a highly organized market where the end-of-life vehicles are safely stripped; scrap metals and all sorts of recovered & refurbished parts are sold. Vehicle Scrapping is the dismantling of Vehicles for its reuse or recycling value as raw metal or dismantling for spare parts.

Cars are manufactured with a mix of metals. On average, a car weighs 1,400-1,600 kgs. Upon recycling, it generates 65-70% steel scrap, 7-8% aluminum scrap, 1-1.5% copper scrap and 15-20% rubber and plastic scrap. Here is a list of Metals recovered in scrapping Vehicle.

Steel

The majority of Car’s body is made up of steel. The average car contains 900kg of steel. Steel is the most common material in an auto. Approximately 55% of a car's weight comes from steel, according to The World Steel Association. The doors, hoods, trucks, and frames of the vehicle are steel. Recycling autos provides enough steel to produce almost 13 million new automobiles.

Aluminum

Aluminum is the second-most-common metal in cars - with 327 pounds (145 Kg) used in an average vehicle. Cast Aluminum is found throughout a vehicle. It is usually used within the engine. It also makes up the Aluminum Rims of the cars, doors, hoods. Approximately 90% of the aluminum of a vehicle is recovered and recycled. Although the aluminum retrieved from an old vehicle represents less than 10% of the vehicle by weight, it accounts for nearly 50% of its scrap value. 

Copper

Copper is often used in electronics, wiring harness, and the battery. Copper is also found throughout the starters and alternators. The weight of an average radiator in a car is 6 kg, copper radiator recyclability is close to 100%. Copper radiator scrap usually sells for around 50% of the price of copper. The copper wires run throughout the vehicle in different systems like the radio, safety systems, and charging points. The total amount of copper in vehicles ranges from 20 – 45 kilograms. Approximately one-third of copper consumed is recycled.

Other Metals

Platinum, palladium, and rhodium are used extensively in catalytic converters. In fact, 60% of platinum is used in the auto industry, even though the amount in each car is relatively small - around 1 to 1.5 grams - and may be getting smaller, as various auto companies use new catalysts that reduce the amount of the precious metals used in their processes. Lead is used in batteries. Approximately 98-99% of car batteries can be recycled. Tin is used in solders, and Zinc plays a role in galvanizing metals.

 Over 75% of an Automobile by weight consists of metals like steel, Aluminum, copper, lead etc., which are indeed recovered in Scrapping.

Scrappage Policy: Enhance Auto Sector

Gadkari said: “The Voluntary Vehicle Fleet Modernization Programme will enable Indian auto industry to take its turnover to ₹10 lakh crore (in a few years) from ₹4.5 lakh crore at present ” The government expects recycling of metals like steel, copper and aluminum from the scrapped vehicles to help reduce their imports.

The new policy presents a huge business opportunity for original equipment manufacturers (OEMs) and significantly the announcement would bring the Indian automotive industry on par with international standard, besides offering the much-needed reprieve for auto, steel and electronics industries that were in need of resuscitation after the onslaught of the pandemic, said Venkatram Mamillapalle, country CEO and MD, Renault India Operations.

“The guidelines will prove to be a boon in the long run. We strongly believe the Scrappage Policy will kick-start the revival of the Indian auto sector and the overall economy,” said Satyakam Arya, Daimler India Commercial Vehicles MD & CEO.

Auto majors have welcomed the new vehicle scrappage policy saying it would encourage people to replace old vehicles while boosting the Automobile Sector.

Scrappage Policy: Low Import of Scrap Metals

“A comprehensive scrappage policy will result in reduction of costs, save foreign exchange and increase revenues in the long term,” said Ashok Khanna, the group head for auto finance at HDFC Bank. For a vehicle manufacturer, recycled metals would be available at a cheaper rate, and the government could save forex because of lower imports of raw materials as well as get tax revenue from new vehicle sales.

According to the HDFC Bank report, the steel industry imports about 6 million tonnes of steel scrap annually, which can be met locally if old vehicles are recycled. The Government expects recycling of metals like steel; copper and aluminum from the scrapped vehicles that helps in reduce their imports.

Scrappage Policy: Massive Supply and Reduction of Cost

The scrap metal in cars can easily be recycled by auto wreckers and recyclers, which reduces the amount of waste that ends up in landfills or sitting in a scrapyard. According to Statistics, 9 million vehicles could go off roads by fiscal 2021 and 28 million by 2025, largely comprising two-wheelers. If these vehicles are scrapped, there will be an enormous supply of Scrap Metals. An HDFC Bank study has estimated the market for vehicle scrappage and recycling at $6 billion.  A comprehensive scrappage policy will result in reduction of costs, save foreign exchange and increase revenues in the long term,” said Ashok Khanna, the group head for auto finance at HDFC Bank. It is predicted that Scrappage Policy would boost the Auto Sector and encourages in the recycling of numerous Scrap metals.  The Vehicle Scrappage Policy will reduce the dependency on imports. It is expected that there will be a huge supply of Scrap Metals that helps to control the cost of Scrap Metals.

Category : Metal

Tags : Scrappage Policy, Huge Supply of Scrap Metal, Reduction of Cost in Scrap Metal


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About Jenisha Rajakumar

I'M a Research Analyst and Content Creator at RIM. Currently I'm researching on Copper Prices around the Globe and the impacts on Copper Scrap Prices with regard to COMEX, LME, SHFE and .... more info

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