Mid-2016, the news about JV between MSTC Limited and Mahindra Intertrade to set up Auto Recycling Units in India made the headlines. Almost simultaneously, talks on the government deliberating on an End-of-Life Vehicle Policy grabbed media attention. Much was said and heard about the location and investment required for such units. Business potential of the auto recycling industry in India gripped analysts for months and officials of both companies were sought after to fill in the gaps in the information. In one of our previous issues, we reached out to Mr SK Tripathi, Ex-CMD, MSTC to gather intel on the topic.
This time around, Steel 360 interviewed Mr Vijay Arora, VP, Mahindra Intertrade to enhance our ken on the subject. Mr Arora gives some interesting pieces of information, for instance, the first unit will be set up in Delhi and not in the previously preferred region of Gujarat. Following are the excerpts.
Q. What has been the progress so far with regards to the Auto Recycling Unit?
A. As you would be aware, the JV agreement was signed with MSTC Limited and the JV Company, called Mahindra MSTC Recycling Pvt Ltd, was incorporated in October 2016. We have moved from the conceptual stage to the execution stage and a lot of research has undergone for that – be it studying the market dynamics, benchmarking, process design, best practices etc. We have visited similar facilities abroad and tried to understand their business processes. We are coming up with our first recycling unit in Delhi, which will be operational by June 2017. This will be a state-of-the-art recycling facility in line with world standards. Depollution and dismantling of vehicles will be done in this unit. A fully-fledged automobile shredding plant will come up in the next year.
Q. When is the Vehicle Recycling Policy expected to be finalized? What could be the key points in favor of the recycling unit?
A. The Ministry of Road Transport and Highways (MoRTH) has come up with the concept note on Voluntary Vehicle fleet Modernization Program (VVMP) and policy is likely to come soon this year. We expect this policy to be finalized by April 2017.
The key points that would favor us will be the strict adherence to pollution norms while dismantling the vehicle. There are a lot of dismantles in the unorganized sector following practices that pollute the environment. Our unit will be the first in the country to dismantle vehicles without polluting the environment. We are looking if the government will be incentivizing vehicle owners to scrap their end-of-life vehicles. Unless the government comes down with firm policies that will ensure strict adherence to the CPCB guidelines, the initiative is bound to fail.
Q. How do you plan to scale up the business? What potential does the Indian market offer?
A. After setting up our first unit in Delhi, we will be setting up 4 more recycling units across the country in the next year. Indian market has a huge potential. According to a government report, there are about 0.7 million cars and 0.45 million trucks and buses that reached their end-of- life in 2015. The number of end-of- life vehicles will keep increasing as the Indian automobile market grew at a rapid pace post 2000. By 2025, 2.8 million cars and 1.2 million trucks and buses are expected to reach their end-of-life – a potential USD 4-5 billion market. This, however, is totally dependent on the government’s will to implement the policies. Unless the guidelines are strictly implemented, the initiative will not be a success. We will wait and watch before we proceed further.
Q. India imports around 6 mnt of scrap, do you think it can be replaced by domestic generation of scrap through vehicle recycling?
A. India is the world’s second-largest importer of scrap steel, behind Turkey, importing around 6 million tonnes a year. By 2020, these imports are expected to double. We want to change India from being a scrap importer to a scrap generating nation. Recycling the end-of-life cars, trucks and buses (based on 2015 numbers) will contribute about 2.5 mnt of scrap. Add to it the 2- wheelers and 3-wheelers, which are huge in numbers, we can substitute the scrap imports by domestic production. By 2025, we will be able to generate 7.5 mnt of scrap just by recycling end-of-life cars, trucks and buses. It will help us reduce our dependency on imported scrap.
Q. How can the unorganized recycling sectors such as Mayapuri be brought into play?
A. There are many recycling sectors in India other than Mayapuri, like Kurla in Mumbai, Pudupet in Chennai and so on. There are a lot of traders & dealers involved in this unorganized recycling sector. A policy can be a success only if it is implemented and monitored effectively by government agencies.
The government has to make sure that while the unorganized sector recycles vehicles, they adhere to the rules like de-registering the vehicle at the RTO, following practices that do not pollute the environment. For example, the current practice in this sector to dispose tyres is to burn them and obtain oil, which has other uses. This process is extremely harmful to the environment. The government has to monitor the unorganized sector to make sure the policy is a success. But on the other hand, a big infrastructure exists for distribution of spare parts which can be leveraged by the new recyclers to ensure that it is a win- win situation for both the markets and benefits the country as well.
Q. Will there be collaborations with private auto collectors for procurement of feed?
A. We are looking at various channels for procuring our feedstock like insurance agencies, transport companies, fleet owners, OEMs, etc. There can be collaborations with private auto collectors and agents.
Q. What is the point of reference of the technology? Where will the shredding equipment be sourced from?
A. We are bench-marking ourselves against recycling plants abroad be it US, Europe or Japan. Unfortunately, there are no shredding equipment manufacturers in India. We are in contact with manufacturers across the globe and discussions are going on in selecting the best equipment for our requirement. As the investment is substantial, we are ensuring that we get the best technology for shredding. A little compromise could be detrimental to the success of the project as the margins are very less.
Source: Steel 360 Magazine Feb’17 Issue