India has witnessed robust financial development more than the final 2 decades which has led to fast urbanisation across the nation, and urbanisation has additional stimulated travel demand which has increasingly been met by private autos. It has been observed that the price of raise in car ownership across the nation is larger than the population development price. The quantity of autos per 1000 population was 51 in 2001 and it has more than tripled to 222 in 2019(1).
Strong demand exists for End-of-Life Vehicles (ELV)
The typical life of a car is envisaged to be 10-15 years, and the raise in vehicular population has also led to an raise in the quantity of obsolete autos [also called end-of-life vehicles (ELVs)]. According to an estimate of the Central Pollution Control Board (CPCB), there had been 8.7 million(2) obsolete autos, in 2015, and it is estimated that they will additional raise to 22 million by 2025.
ELVs which are not in working situation are dumped on roadsides or open plots and they block these spaces. ELVs which are in working situation discover purchasers (as ‘used’ vehicles) regardless of becoming more polluting and much less fuel-effective than their newer counterparts.
According to Deloitte Research, the made use of car or truck industry in India is about 1.3 instances the new car or truck industry and it is increasing at about 17 to 18 % just about every year. On 1 hand, made use of vehicles are regarded to be greater for the atmosphere considering the fact that manufacturing of new vehicles produces more CO2 and contributes to international warming, though on the other hand, the larger the age of the car (specifically ELVs), the much less power effective it is. Owing to the lack of recycling/ scrappage policy and enforcement relating to the similar for old autos, the ELVs continue to stay on the roads and develop pollution and congestion.
The unorganized market of car recycling and scrappage is generating pollution
Approximately 65%(3) of a car are metals and the rest are plastic, rubber, glass, and so on. Hence, a lot of these components can be reused if there is appropriate salvaging. However, the structure of the car recycling and scrappage market in India is extremely unorganized and due to lack of regulations, car scrapping poses dangers to public well being and the atmosphere. Some of the made use of autos finish up in scrap yards, and they use crude and unscientific procedures to dispose of autos. The autos are hammered and dismantled, from which some components are resold and other individuals normally dumped.
According to a CPCB report(4), components like non-functional switches, brake footwear, and rubber components, and so on. are disposed of carelessly — releasing asbestos, mercury, and quite a few other pollutants in the atmosphere. Further, liquids like coolant, brake, and hydraulic fluids, and so on. are drained on the ground resulting in contamination of groundwater and air.
Considering the challenges which ELVs develop on-road as properly as due to the recycling and scrappage practices, there has been a dire want for a complete and robust policy in India for handling ELVs. And such policy wants to be complete maintaining in thoughts all the essential stakeholders like car owners, scrappage market players, as properly as automobile companies.
The Government of India has been cognisant of this reality and they have been working on a new policy more than the final couple of years, with an objective to address the prevalent challenges as properly as to market the new clean car technologies like Electric Vehicle. But as the quantity of ministries(5) involved in figuring out this policy has been big it has taken some time. However, primarily based on the current announcement by the Government, it seems that the policy ought to be finalised quite quickly.
A balanced policy appears to be on the anvil
Based on the draft note issued by the government, and the discussions and deliberations going on with the market, the broad contours of the upcoming policy are as follows:
– Vehicles older than 15 -20 years(6) could be viewed as for scrapping.
– Vehicles crossing their defined End-of-Life will have to undergo fitness certification by way of an automatic fitness certification test for acquiring re-registered just about every 6 months.
– The expense of re-registration is anticipated to raise lots of folds from the prevalent prices indirectly dis-incentivising the similar.
– Vehicle owners who surrender their old car may perhaps be issued with a certificate which can be used to get a discount on their new car or get a waiver on registration/road tax for a new car.
– The car owners who may perhaps not opt for purchasing a new car may perhaps be in a position to trade the certificate in the industry for monetary advantage.
In addition to the above, the government is also in course of action of issuing recommendations for setting up, authorisation, and operating of Authorised Vehicle Scrapping Facility (AVSF). These initiatives in tandem are anticipated to develop the ideal push-pull issue which is essential for organising the otherwise un-organised Vehicle Recycling and Scrappage market.
Impact on the Auto Industry
Globally, governments have correctly made use of car scrappage policy as a tool to stimulate auto demand. After the 2008 international economic crisis, nations like the USA, Canada, UK, Germany, China, and so on. rolled out old car scrappage applications and they accomplished fantastic benefits from it. Out of all the nations, the scrappage plan of Germany was the biggest and it has been so till date, and the plan not only resulted in an raise in new car or truck sales by about 30-35%(7) for about a year, but it also helped the enhancing the atmosphere owing to lowered vehicular emissions.
Hence, primarily based on such experiences it can be confidently stated that the upcoming policy measures will not only help car owners who didn’t have any incentive so far in scrapping the ELVs but will also advantage the automobile market in escalating its sales. Some of the envisaged advantages to the auto market from this initiative are talked about under:
– With fantastic incentive offered for ELV owners, to go for scrappage, the automobile market which is going by way of a downturn due to the COVID-19 pandemic may perhaps witness a surge in car demand.
– The so-far unorganised market will transform into an organised 1 and it provides an chance for automobile companies to enter into this segment wherein so far only 1 Indian Auto Manufacturer has began operating in collaboration with a Public Sector Undertaking (PSU).
– It will create new job possibilities in the organised automobile sector generating a skilled workforce in the market.
– In addition to a new organization line, recycling of the ELVs provides a large chance for creating recycled metal like steel, aluminium, and copper, and so on. which will, in turn, minimize their expense of raw material as they shall be procured in-property as an alternative of importing them.
– This chance may perhaps also grow to be larger simply because the Government is also taking into consideration the improvement of a international scrappage hub at Alang, Gujarat which will raise the scale of operations and availability of metals manifold.
While the Government had currently lifted the ban on the buy of new vehicles by government departments in September 2019, they can additional stimulate the auto demand by taking into consideration the imposition of a ban on the use of old autos (viz. BS2, BS1 or older) by all the Central and State Government Ministries, Departments as properly as PSUs which may perhaps create a big demand for CV’s, PV’s and even 2 wheelers.
However, it is also crucial that particular checks and balances are place in location to aid realize maximum advantages from the plan. For instance, the scrappage incentive ought to not be made use of by the car owner to procure a replacement car that is much less effective or more polluting than the present car. This will undermine the environmental advantages anticipated from the scrappage policy. Also, the most effective benefits from such a plan are ordinarily observed when the work is concerted and sustained more than a number of years with companies joining in.
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1 Source: Transport Research Wing, Ministry of Surface Transport Census of India and Deloitte Analysis
2 Source: Analysis of the End of Life Vehicles (ELVs) Sector in India, Central Pollution Control Board, August 2015
3 Source: www.metalscraps.co.uk/ news-automobiles-for-recycling-are-about-65-of-steel-and-iron-15.html
4 Source: Analysis of the End of Life Vehicles (ELVs) Sector in India, Central Pollution Control Board, August 2015
5 The ministries involved are Ministry of Steel Ministry of Micro, Small and Medium Enterprises Ministry of Heavy Industries & Public Enterprises, and Ministry of Environment
6 15 years for Commercial Vehicles and 20 years for Passenger Vehicles.
7 Source: Synthesizing Cash for Clunkers: Stabilizing the Car Market, Hurting the Environment? By Stefan KlÖßner and Gregor Pfeifer, 2018
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