Metal recycling sector is thriving and growing in India. However, it is not well-organized in comparison with the international market. Large volumes of unaccountable and non-segregated scrap are still inadequately used and most of the sector is still highly unorganized. As a result of this, primary production segment faces a large burden which in turn has been depleting India’s natural resources.
With carbon footprint reduction becoming a key priority for nations around the world, many developed and developing nations are actively promoting the use of metal scrap. However, the overall Indian recycling rate is minimal, hovering around 20 to 25 percent when compared to the U.S. which is a net exporter of scrap with recycling rates of 80 to 90 percent; and Europe which has recycling rates in excess of 70 percent. The enormous success of the developed world’s recycling rates has been attributed to an industrial cluster model. Under this model, collection centres, end customers, logistical support, scrap yards, and scrap processing centers are all located in proximity and well-integrated under one single area called the Metal Recycling Zone.
The need of the hour for India is to improve scrap consumption. This will help reduce carbon footprint, a key priority under the Kyoto Protocol Agreement.
WHY DEVELOPED NATIONS ARE SO SUCCESSFUL?
Developed countries have been successful because they have adopted and implemented successfully an industrial cluster model.
- Japan has moved away from dependence on ore to production through the secondary steel route. In addition, Japan also maintains a well-organized municipality system. There are around 1,850 municipalities functioning under the system. They are well-backed by a strong network of 800 recyclers in steel making.
- United Kingdom maintains recycling system wherein scrap dealers need to obtain licenses from local council. This helps to prevent stolen metals while ensuring that payment is accepted only through cheque or E-transfer.
- Saudi Arabia has created Scrap Metal Centers (SMCs) promoted by the Government of Saudi Arabia near major industrial hubs. All the scrap yards were shifted to the hubs. Each SMC is well-equipped with shredders, separators’, etc.
- UAE has adopted a well-knit system where major recycling clusters and free zones are situated. They all are located in Jebel Ali.Dubai, a key strategic destination that exports clean scrap to the world.
METAL RECYCLING SCENARIO IN INDIA
According to a report by Frost & Sullivan’s Metals and Minerals Practice, the Indian Metal Recycling industry is hampered by several key interlocking bottlenecks. Like minimal existence of a metal scrap recycling ecosystem and lack of sufficient domestic laws and legislation, critical for assisting and applying to the industry. One such legislation that does not exist is ‘End of Life Vehicle’.
Aside from this, the other major issues are:
- Inverted duty structure Free Trade Agreements (FTA) for duty-free imports into India of finished metal products. This is allowed while metal scrap is still levied with import duty.
- CENVAT credit of major metal recycling companies are accumulating and lying idle with the Government. This is badly hurting the existing metal recycling companies.
- Metal recycling activity in India is still not that well-organized, when compared with the international market.
WHAT NEEDS TO BE DONE?
To become a net earner, the Indian Government should
- Actively promote organized scrap recycling clusters like it’s done in the developed countries. This will help to conserve natural resources and key utilities.
- Remove the basic import duties. This will empower a large section of domestic secondary producers to sell not only material at a competitive price in the domestic market but would also help them to capitalize on exports.
- Halt the invasion of value-added goods coming from FTA countries at zero duty. This is directly encroaching into local producers’ market share. India has around 20000 to 25000 metal recycling units and they will be among the hardest hit.
- Provide SEZ benefits. This will help the metal recycling sector to acquire industry status.
- Single window set-up for centralized integrated policies. This should be supplemented by tax holidays and lower lending rates.
- Subsidize lending rates and increase financing facilities. If this is done, the metal recycling sector will gain added incentives to perform better. Like for instance, if they achieve Carbon credits, they should be awarded.
- Encourage the flow of more FDI in Indian metal recycling sector. This will bring in latest technologies and techniques with the best practices from overseas players, and uplift the overall metal recycling industry.
All of the above will encourage the metal recycling industry to invest more in the sector. It will also help create new, direct, and indirect employment, boost FDI, encourage technology development through joint-ventures, reduce basic import duty on scrap to zero, and finally, give a shot in the arm to metal recyclers which in turn will help grow and contribute to the Indian GDP.
Going forward, support from the Central as well as the State Governments will be important. If the support is there then it will better promote metal recycling sector in India and help it flourish.
