Page 3 - Policy Brief on Designing a Business Model for Sustainable Management of End-of-Life Vehicles (ELVs) in India
P. 3
TERI Policy Brief
at free spaces, and/or sell them to a dismantler who scrapped’. Since the opportunity cost of retaining the
operates mostly in the informal sector (without getting old vehicle by the owner may not be very high—in fact,
to know what happens to its parts and components). the vehicle may serve the owner well in terms of use for
Another channel that the consumer could use for getting shorter distances—many vehicle owners do not discard
rid of ELVs is to exchange it with a new vehicle under the their unroadworthy8 vehicles and so these vehicles may
buyback option offered by the car dealers. never formally reach their end of life. If they do decide
to declare their vehicle as redundant, the scrapping
The government is also working towards a legislation allowance they would get by selling the vehicle to the
to bring in producer responsibility that would make it informal sector is more than what they would get from
mandatory for automakers and their agents to buy a formal dismantling facility. The reason for this is that
old and unroadworthy vehicles and recycle them. The the cost of operations in the informal sector (where no
producers could exercise this responsibility with the occupational and health safety guidelines are followed)
help of the dealers. This may open another channel is very low as they do not internalize any social and
where the vehicle owners could go sell their end-of-life environmental costs.
vehicles. It is important to note here that in some of
the developed countries (for example, in Japan), there There is a need to provide training to workers,
is no physical buyback of the vehicles by the producers create awareness, and provide an economical access
(OEMs), but these OEMs are responsible for sourcing for the necessary equipment and technology for the
back of only three revenue-negative components-CFs, safe and efficient dismantling of the auto components
airbags, and shredder residues, for which they charge a for the end-of-life vehicle management. Doing so will
cess and take help from specialized agencies that collect serve the dual objective of addressing the hazardous
these components. working conditions prevalent in the informal sector
and increasing the cost of informal dismantlers thereby
Figure 1 presents an illustration of the current system incentivizing environmentally sound and economically
of ELV management in India.
Figure 1: Existing framework for ELV Management in India
It is interesting to note that there is no clear definition Source: Authors compilation
of what would determine a vehicle to have reached
its end of life. According to the Automotive Industry viable recycling units to become price competitive.
Standard (AIS) 129, ‘End-of-life vehicle means, a vehicle The dismantling that takes place in the informal sector
which at the discretion of its last owner is ready to be is crude and focuses on component reuse which are
8 There are two categories of unroadworthy vehicles: damaged in accidents or certified
as unfit by transport authorities (one whose registration has expired).
MARCH 2017 3
at free spaces, and/or sell them to a dismantler who scrapped’. Since the opportunity cost of retaining the
operates mostly in the informal sector (without getting old vehicle by the owner may not be very high—in fact,
to know what happens to its parts and components). the vehicle may serve the owner well in terms of use for
Another channel that the consumer could use for getting shorter distances—many vehicle owners do not discard
rid of ELVs is to exchange it with a new vehicle under the their unroadworthy8 vehicles and so these vehicles may
buyback option offered by the car dealers. never formally reach their end of life. If they do decide
to declare their vehicle as redundant, the scrapping
The government is also working towards a legislation allowance they would get by selling the vehicle to the
to bring in producer responsibility that would make it informal sector is more than what they would get from
mandatory for automakers and their agents to buy a formal dismantling facility. The reason for this is that
old and unroadworthy vehicles and recycle them. The the cost of operations in the informal sector (where no
producers could exercise this responsibility with the occupational and health safety guidelines are followed)
help of the dealers. This may open another channel is very low as they do not internalize any social and
where the vehicle owners could go sell their end-of-life environmental costs.
vehicles. It is important to note here that in some of
the developed countries (for example, in Japan), there There is a need to provide training to workers,
is no physical buyback of the vehicles by the producers create awareness, and provide an economical access
(OEMs), but these OEMs are responsible for sourcing for the necessary equipment and technology for the
back of only three revenue-negative components-CFs, safe and efficient dismantling of the auto components
airbags, and shredder residues, for which they charge a for the end-of-life vehicle management. Doing so will
cess and take help from specialized agencies that collect serve the dual objective of addressing the hazardous
these components. working conditions prevalent in the informal sector
and increasing the cost of informal dismantlers thereby
Figure 1 presents an illustration of the current system incentivizing environmentally sound and economically
of ELV management in India.
Figure 1: Existing framework for ELV Management in India
It is interesting to note that there is no clear definition Source: Authors compilation
of what would determine a vehicle to have reached
its end of life. According to the Automotive Industry viable recycling units to become price competitive.
Standard (AIS) 129, ‘End-of-life vehicle means, a vehicle The dismantling that takes place in the informal sector
which at the discretion of its last owner is ready to be is crude and focuses on component reuse which are
8 There are two categories of unroadworthy vehicles: damaged in accidents or certified
as unfit by transport authorities (one whose registration has expired).
MARCH 2017 3
