MR - Alekh Tiwari (KPMG)

Benefits of Metal recycling
policy
MRAI conference
Alekh Tiwari, Director –Management Consulting, KPMG
January 2017
KPMG.com/in
1
Table of contents
1 Scrap metal recycling – Global scenario
2 Indian consumption of scrap metal
3 Benefits of the Metal recycling policy
4 Challenges in Indian metal recycling
5 Key international policies and practices
6 Brief policy recommendations
© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2
Overview of global scrap metal recycling market
“The global metal recycling market is expected to grow at a CAGR of 8 per cent to reach an estimated value of
USD400 billion by 2020 from USD277 billion in 2015”
Import – export of ferrous scrap (MT): FY15 Comparison of Recycling rates
13
76% 58%
7.3 7.8
5.2
3.5 37%
2.3 87% 93% 82% 80%
0.3 70%
0.1 0 0.003 50% 45%
33%
U.S. U.K. Japan China India 11%
Export
Steel Aluminium Copper
Import – export of Al & Cu scrap (MT): FY15 U.S. Japan India World
Import
5.9
Note: Steel Recycling Ratio = Scrap /Crude Steel Production
• India is the third largest importer of metal scrap in the

2.5
world
• Recycling rates in India are below world average and
0.7 1.0
0.6 countries such as U.S. and Japan
0.2 0.0 0.2 0.0 0.0
Source; World Steel Recycling in Figures 2011-2015, BIR Global Facts and Figures; Aluminium and
U.S. U.K. Japan China India copper scrap market report, Metal Bulletin, EuRIC, November 2015; Metal Recycling Sector:
Contributor to National Wealth, Frost & Sullivan, accessed on 22 August 2016; Metal Recycling Market
- Forecast to 2020 , MarketsandMarkets
Low domestic scrap generation amongst the key reasons for India’s dependence on Scrap imports
© 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 3
Consumption of scrap is steadily increasing in India
“Domestic production of scrap was 30.5 million tons in the year 2015 whereas demand was close to 37 million
tons resulting in net import of approximately 6.5 million tons.”
Import of ferrous and non-ferrous scrap by major countries (million tonnes): FY16
• India imported ~8.1 million tonnes (MT)
of ferrous and non-ferrous scrap in
U.K. FY16, an increase of ~20% as compared
to FY15
0.94 0.15
U.S. Saudi • Ferrous scrap imports - ~ 6.9 MT
China • Non-ferrous scrap imports - ~1.1 MT
1.14 0.12 Arabia
0.002
0.02 0.14 • Steel (including stainless) and
U.A.E. Malaysia aluminium are the major scrap
Ferrous imported in to India, accounting for
scrap 1.00 0.16 0.21 0.02
Brazil ~96% of the total imports in FY16
Non-
Singapore
ferrous 0.21 0.001 0.40 0.02 • The U.S., U.A.E. and the U.K. are the
scrap South Africa largest exporters of metal scrap to India
Australia
0.76 0.05 0.40 0.06
It is estimated that by year 2020, domestic scrap generation will reach 43 million tons whereas demand would be about to
53 million
Source; EXIM database, accessed on 22 August 2016; KPMG in India’s tons creating a deficit of 10 million tons
analysis, 2016
© [2017] KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 4
Objective and benefits of metal recycling policy
OBJECTIVE
This policy aims to develop a framework for efficient and effective management of ferrous and non-ferrous
scrap material in India across the value chain and address key gaps in the metal recycling process
KEY BENEFITS
1. Domestic recovery of scrap will ensure reduction in scrap and metal imports, thereby
reducing trade deficits
2. Metal scrap recycling will lead to natural resource conservation and energy savings
3. Processing metal scrap in an organized, safe and environmentally efficient manner
4. Promotion of a formal collection and shredding mechanism for end of life products that are
sources of metal scrap
5. Generation of new sources of revenue and employment for Government
6. Contribution and promotion of the Swachh Bharat Abhiyaan by developing recycling zones
7. Establishing mechanisms such as e-auctions, defined payment systems for monitoring and
regulating the metals recycling sector in India across the value chain
© [2017] KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved 5
Scrap Value Chain and Challenges
Existing value chain involves multiple sub-processes and is beset with multiple challenges at each level
Scrap Value chain Key Activities Key Challenges in value chain
• New scrap is generated as by-product during creation • Lack of End of Life policy of consumer products/automobiles
1 Generation of metallic goods from public/private manufacturers • Quality of domestic scrap is lower than that of imported scrap
• Old scrap is generated from disposal of metallic goods • Import duty on scrap and PSIC regulations
(auto, industrial, home, worn out heavy machinery) • No definitive guidelines exist for scrap classification
o Procurement
• Scrap sourced either locally or via imports. Scrap is • No guidelines for pricing and payment mechanism
imported primarily from international economies • Lack of usage of safety gears (specially in unorganized market). Moreover, no
o Dismantling/Sorting health benefits for employed labor
2
Collection • Scrap is sorted to remove attachments. Small size • During manual dismantling/, scrap is not checked for radioactive elements
scrap is sorted via machines and larger size manually • No policy exists to prevent usage of stolen good scrap
o Processing • Absence of scrap specific licenses prevents enforcement on industry activities
• Based on demand, scrap is compressed to bails for • Lack of policies for detection and storage of war/hazardous scrap
easy handling
o Smelting - Scrap is fed to furnace to create molten

• Polluted scrap fed into furnace often leads to generation of poisonous fumes and
metal, which is used to create ingots
Usage change in composition of end product
3 o Commercial Job Parts - Sheet scrap is used to create
• No incentives for R&D on recycling/waste reduction
equipment such as toys
• Residue from the melting process typically contains • Smelters ( specially in unorganized market ) dump residue in unsafe manner
4 oxide and metallic compounds. Residue either sold to • Water used in metal recycling is disposed without treating
Disposal
recyclers or dumped at authorized locations • No residue classification exists to create disposal policy
Note: Challenges mentioned in red indicate practices that are prevalent internationally but completely absent in India
6
Key international policies and practices
End of life policy ■ Extended producer responsibility principle ■ Developed economies have created robust
implemented in EU, Japan, Korea and China for ecosystems which help ensure participation of all
ecosystem
Recycling
management of end of life products specially stakeholders across the value chain.
automobiles and home appliances. ■ Japan has a strong network of 800 recyclers and
■ Producers have established authorized collection over 1000 municipalities which collect and recycle
and shredding centres to process old scrap scrap in organized manner.
■ Japan and EU have achieved more than 85 per cent ■ U.S. has about 350 auto shredders, and local
recycling rate for end of life vehicles. municipality to collect and scrap metal products.
■ China set up 7 industrial recycling parks with a target
Recycling
to create dedicated end to end metal recycling areas.
zones
It plans to setup 15 more facilities.
■ Scrap Metal Centres (SMCs) with shredders,
processors etc. near major industrial hubs were
created in Saudi Arabia and U.A.E.
■ Automobile and other appliances manufacturers

■ United Kingdom implemented the Scrap Metal have launched zero waste approach to which
Metal theft
Zero waste
Dealers Act in 2013 to reduce metal theft, register all includes environment safe product design and reuse
policy
scrap metal dealers and entirely ban cash payments of scrap generated.
in scrap procurement. ■ Countries such as Australia, U.K. have specific
■ Similar laws were implemented in some states of disposal policies which discourage waste from being
U.S.A. and Africa. landfilled by classifying waste and providing quality
protocols.
Source; Metal Recycling Sector: Contributor to National Wealth, Frost & Sullivan, accessed on 22 August 2016; Scrap Metal Dealers Act, 2013; Understanding the Landfill Directive 2010, Environment Agency, U.K.; How GM
Makes $1 Billion A Year By Recycling Waste, Forbes; Report on Key Industrial Parks in China , Mortenson China; Material Recovery and Recycling of Waste 2012, Kingdom of Saudi Arabia National Environmental Guidance
Recommendations
Recommendations- Short Term (1/2)
Revision of Import Duty Re assessment of Inspection Exemption from Hazardous
Certificates Waste Provisions
• Revision of duty on imported • As per DGFT’s Public notice • The Hazardous and Other Wastes Rules,
scrap such that finished No.12/2015-20 a registered PSIA 2016 categorizes metal scrap as “Other
products domestically remain should provide photographs , video Waste” and necessitates
competitive with imported clip of the inspection process prior to • A new manifest system that requires
finished products. export to India 7 color coded documents for
domestic movement of metal scrap
• Currently, scrap processors in • These rules have resulted in • A Chemical analysis certificate for
ASEAN countries (with whom burgeoning of numerous PSIA’s imported metal scrap
India has signed FTA) do not issuing fake certificates as such
pay any duty for importing requirements do not exist in any other • Above mentioned provisions pose
scrap country significant challenge for the scrap metal
industry
• Lack of duty on finished • It is recommended to review the
products makes market revised rules and provide for strict • MoEF in consultation with MRAI, ILZDA,
uncompetitive for domestic inspection of shipments at the Indian etc. should consider exemption of metal
producers Ports in addition to the radioactive scrap from aforementioned provisions
scanners present at 9 designated
ports
Recommendations- Short Term (2/2)
Input tax credit in Scrap Level playing field for Industry status for metal
Define Safety Standards
value chain Secondary Steel sector scrap sector
• At present there is no • Manual dismantling and • India Secondary steel players • Currently, metal scrap sector
provision of providing any sorting of scrap poses cannot participate in any does not enjoy any industry
input tax credit to serious safety threats to central or state government status
stakeholders present in scrap employees tenders due to certain
recycling value chain clauses in the tenders which • Conferring industry status
• OSHA has provided tend to favor primary can lead to following
• Due to this, the stakeholders Permissible Exposure Limits producers benefits:
have to pay the tax twice i.e. (PELs) above which filtering
first time on the purchase of of fumes/emissions and • Government tendering o Obtain funding from the
input material and second protective respiratory gear is system terms/ conditions financial institutions
time on the product sold necessary should be revised to provide o Easy sanction of loans for
thus leading to multiple secondary steel players a projects
taxation • The central government level playing field o Stabilization of interest rates
needs to define safety o Speedier approvals for
• Government should consider guidelines for employees in project activities
tax credit to the stakeholder the scrap sector using o Entry of new players and
on the input material international benchmarks investors in the sector
purchased as previous such as OSHA guidelines as
stakeholder in value chain reference
has already paid the taxes on
the finished product
Recommendations- Medium Term (1/2)
Development of a shredding ecosystem
• Need to have a framework focusing on
Role of Government
environmentally safe management of
following end of life products
o Automobiles & White goods The state government should identify sites and provide a single window for
registration and necessary approvals.
o Ships and defense sector
o Heavy machinery equipment These shredding centres may be set up by third parties independently or in a PPP
Define end of life criteria and set up

o Worn out machinery from model
public/private sector manufacturing
units etc. Shredding centres will need to be established on the basis of certain guidelines on
shredding centres
output / distance from customers etc. Key Steps for establishment of shredding
ecosystem entails:
• Factors for defining end of life criteria –
age, fitness, wear and tear and 1. Defining End of Life Criteria
environmental impact for various product 2. Establishing Collection & Processing Centres.
categories. 3. Establishing Shredding & downstream Metal Separation Plants
• End of Life Vehicles will entail the 4. Identification of locations for Shredding Centres
following additional requirements: Role of Shredder/Producer
o An integrated MIS to track
To enable organized and increase collection
registered/deregistered vehicle, current
owner, criminal records if any etc. • The shredding centre will have to pay a fair price for the end of life product it
o Provision of a certificate of destruction collects based on its quality, age, recyclable value etc.
which enable consumer incentives on • Producers may be encouraged to voluntarily announce take back schemes
purchase of new vehicle
Recommendations- Medium Term (2/2)
Installation of Radiation
Define BIS Specifications Introduction of Registration process
Detection Equipment
• The BIS, in conjunction with an industry • Introduction of registration process to identify • Government has installed radiation
body like MRAI, should develop metal authorized metal scrap dealers and facilitate detection scanners at major ports
scrap specifications in order to deal in movement towards an organized sector
more materials and improve quality • Such equipment should be installed at
assurance • Easy access to financing and tax breaks could be • All Indian Ports
provided to scrap dealers willing to set up • Inland Container Depots
• These standards should also ensure that operations in regulated zones and opt for • Container freight stations
finished products in an industry have registration • Steel mills
similar technical composition to enable • Metal recycling yards
processor to scale up their production • Acceptable modes of payment ( cheque or • All units/mills consuming or metal
electronic) should be defined for all high value scrap of any kind
• It is essential to determine specifications purchase transactions to reduce illegal
for the purpose of quality assurance. transactions in unorganized market • Measures should be taken to implement
Internationally recognized standards and monitor Atomic Energy (Factories)
technical specifications like ISRI Scrap • An e-auction system may be setup for sale and Rules, 1996 regulations regarding safe
Specifications Circular 2016 can be used purchase of scrap to enhance transparency storage, safe transport and disposal of
as reference. radioactive scrap
Recommendations- Long Term
Setting up of Recycling Implementation of Zero Focus on ship breaking Improve Waste disposal and
Zones Waste Policy activities treatment Infrastructure
• Recycling zones should be set up • Central government in • Central Government needs to • The state government in
which house multiple end to end association with the industry work with international conjunction with SPCB should
processors producing intermediary should propagate the concept agencies involved and identify and establish disposal
and end products from metal scrap of “Zero Waste” in the originating states to promote and treatment facilities near huge
manufacturing industry to efficient tracking of ships industrial areas and metal
• It is imperative to begin development promote recovery and reuse clusters as per Hazardous waste
of recycling zones in existing metal of materials • The central government rules
clusters, scrap yards, ports, mines should set up more ship
and ship breaking facilities which are • Central Government should dismantling facilities and • Scrap to be disposed should be
primary sources of scrap generation lay down quantitative targets upgrade existing facilities specifically categorized according
for waste reduction under its Sagarmala project to its hazardous nature. There
• Dedicated area for recycling zones should also be classification of
may be earmarked within SEZs, • Focus on research and • A one stop nodal agency landfills to receive the
manufacturing zones/clusters, development to enhance should be set up for providing corresponding kind of waste
industrial corridors and parks existing metal recovery and the necessary approvals for
promote use of technologies certified breaking of original • The CPCB must would need to
• Proximity to user industries, presence in the sector equipment. • Define SOP for landfills to
of industrial corridors, availability of accept or reject scrap material
land at competitive rates and other • Provide guidelines for set up
such parameters must be considered of adequate landfill sites and
while setting up a recycling zone their classification
Implementation Steps
Implementation Model
• Based on the perspective plan, the formation • Necessary for or smoother coordination and
of the agencies at the Centre and State speedier implementation of recommended
would be undertaken. policies
• Setting up nodal agencies and/or other • The task force will be responsible to
Special Purpose Vehicles (SPVs). o Conduct periodic reviews,
• The state level SPVs would be undertaken at o Remove infrastructural, procedural and
the necessary stages. institutional bottlenecks and
o Achieve policy coordination
Steps
• Prepare specific rules, by-laws and • The perspective plan would comprise the
regulations e.g. SOP for shredding centres, following:
guidelines for scrap smelters & PSICs etc. o Vision, broad objectives and targets
• The DPRs will provide o Assessment of the scrap generation, required
o Opportunity assessment including infrastructural capacity etc.
feasibility analysis, o Funding and financing arrangements
o Financing plan, o Integration of the policy components with
o Execution models, initiatives e.g. Make in India, Swachh Bharat,
o Implementation schedule Smart Cities mission, Industrial corridors etc.
o Responsibilities of all stakeholders etc.
o Institutional Framework
Alignment with key national priorities
Contribution to the Swachh Bharat mission due to the following:
o Enforcing the hazardous waste 2016 guidelines
o Introduction of Zero Waste Policy
Swachh Bharat o Regulating illegal dumping of end of life products,
o Focus on correct and efficient disposal of hazardous/non-hazardous scrap into authorized sites
Promote localization and reduce reliance on imports

o Currently, net import of metal scrap are almost 7.2 million tons and are slated to rise to 11.6 million tons by
year 2021-22.
Make in India o Scrap metal recycling policy aims to develop domestic metal scrap industry which will lead to increase in
availability of domestic metallic finished goods in market.
Establishment of recycling zones and shredding centres will be a part of developing self-sufficient and
Smart Cities sustainable smart cities
Up gradation of ship breaking yards and establishment of recycling zones in coastal economic zones will
Sagar Mala contribute to the objective of transforming Indian port infrastructure.
Thank you
The information contained herein is of a general nature and is not intended to address the
Contact
Alekh Tiwari
Director – Management Consulting

KPMG Advisory Services Private Limited
circumstances of any particular individual or entity. Although we endeavour to provide accurate T +91 9971 547 444
and timely information, there can be no guarantee that such information is accurate as of the date
it is received or that it will continue to be accurate in the future. No one should act on such E alekhtiwari@kpmg.com
information without appropriate professional advice after a thorough examination of the particular
situation. The document is meant for e-communication only.
© [016] KPMG, an Indian Registered Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG kpmg.com/in
International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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Benefits of Metal recycling

Alekh Tiwari, Director –Management Consulting, KPMG

2 Indian consumption of scrap metal

3 Benefits of the Metal recycling policy

4 Challenges in Indian metal recycling

5 Key international policies and practices

6 Brief policy recommendations

• India is the third largest importer of metal scrap in the

o Smelting - Scrap is fed to furnace to create molten

■ China set up 7 industrial recycling parks with a target

■ Automobile and other appliances manufacturers

Define end of life criteria and set up

Promote localization and reduce reliance on imports

Director – Management Consulting

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