This is part 2 of a 2-part series on scrap recycling in India, check out part 1 if you missed it yesterday.
The overall Indian recycling rate is about 25%. Compare this to the US – which is a net exporter of scrap with recycling rates of 80 – 90% and Europe, which has recycling rates in excess of 70%.
India’s annual scrap consumption is about 21 million metric tons while its imports are about 7 mmt a year, making it the world’s third-largest importer of scrap. A Frost & Sullivan report claimed India’s metal recycling industry had the potential to grow 11.4% per year until 2020 – but that comes with a big rider. Growth can only happen once the import duty and other free trade hurdles have been removed.
India, incidentally, is perhaps the only country in the world to impose an import tax on steel scrap. This happened 2 years ago. The Metal Recycling Association of India has been on the forefront of a campaign to get the import tax stricken, with the current political administration even agreeing to look at the demand favorably.
So, while semi-finished products can be imported duty-free into the country, there is a 5% import duty on steel scrap, thus impacting the profitability of recyclers.
But the story on aluminum scrap is the exact opposite. India’s aluminum demand has been growing at an annual rate of about 11%, compared to a global growth of 6%. Part of the growth is fueled by imports including of aluminum scrap, especially from China.
Indian Commerce Minister Nirmala Sitharaman recently told parliament that the government was considering a request for doubling the duty on aluminum imports to 10%, following representations that imports of aluminum scrap, especially from China, and the metal’s decreasing global prices were adversely impacting the industry in India.
What India Must Do to Increase Scrap Recycling
Essentially, for the Indian recycling sector to get an impetus and turn into a net earner, analysts including Frost & Sullivan, recommended the Indian Government initiate the following:
- Removal of the basic scrap import duty
- Offer Special Economic Zones, the benefits of which will enable industry status for the metal recycling sector
- Subsidize lending rates which will add more financial muscle in this sector