Car Scrap Dealers Face Uncertain Future as New Facility Opens in Bengaluru
The vehicle scrapping business in India, which has predominantly operated in the unorganized sector, is
on the brink of a major transformation with the introduction of Registered Vehicle Scrapping Facilities
(RVSFs). Car scrap dealers in Bengaluru are gearing up for this change, as RVSFs are expected to
revolutionize the way end-of-life vehicles are disposed of and recycled.
Operated as a joint venture between Mahindra Accelo and government-owned MSTC Limited, the RVSF
in Bengaluru is set to attract vehicle owners looking to responsibly dispose of their vehicles while
ensuring an eco-friendly scrapping process. This development seeks to address the existing concerns
associated with handing over end-of-life vehicles to unorganized scrap dealers, which often entails risks
of misuse.
Understanding the Need for Vehicle Scrapping:
The government has mandated the scrapping of its vehicles after 15 years, but scrapping personal
vehicles remains voluntary. As long as personal vehicles pass fitness tests at government-authorised
Automated Testing Stations, they can continue to operate. However, any vehicle failing this fitness test
will be required to be scrapped at an RVSF. Commercial vehicles, on the other hand, need to clear a
fitness test annually to renew their registration, ensuring their roadworthiness.
The Role of RVSFs:
RVSFs are authorised to apply for the de-registration of end-of-life vehicles with the Regional Transport
Office (RTO). If the RTO does not respond within seven days, the application is deemed accepted,
allowing the RVSF to proceed with the scrapping process. Vehicle owners receive a Certificate of Deposit (CoD) to confirm the handover of their vehicle for scrapping, followed by a Certificate of Vehicle
Scrapping (CVS) to certify that the scrapping process adhered to government norms and eco-friendly
practices.
Incentives for Vehicle Owners:
To encourage vehicle owners to choose RVSFs, the government offers incentives for each CoD. The
incentives vary from state to state, with Karnataka, for instance, providing a discount on road tax for
new vehicles equivalent to 25% of the road tax paid for the scrapped vehicle. For those not interested in
purchasing a new vehicle, CoDs can be traded with interested parties.
Local Scrap Dealer vs. RVSF:
Currently, local scrap dealers enjoy a cost advantage over RVSFs due to their longstanding presence in
the market. Their lower overhead costs stem from years of operation, but this advantage comes with
associated risks, such as vehicle misuse and opacity in the scrapping process. The 25% road tax discount offered by the government is intended to offset the 20% price difference between local scrap dealers and RVSFs in Karnataka.
Professionalising the Scrapping Business:
RVSFs established by prominent automobile companies are expected to bring professionalism to the
vehicle scrapping process. These facilities will guide vehicle owners through the scrapping journey,
offering them peace of mind. As more RVSFs become operational across India, the unorganized sector”s
vehicle scrap dealers are likely to face challenges.
Challenges and Opportunities:
While the unorganized sector has decades of experience and a well-established network, they are facing
hurdles in transitioning to the organised sector. One of the key challenges is acquiring the necessary
land, as RVSFs require at least 2 acres. Additionally, raising capital simultaneously for such operations
remains a significant obstacle. Collaboration between existing vehicle scrap dealers and RVSFs is being
explored as a potential solution.
The Road Ahead:
The future of India”s vehicle scrapping business is at a crossroads. RVSFs, driven by government
mandates and environmental concerns, are poised to reshape the industry. As they recover their capital
investments over time, the competitive advantage of local scrap dealers may diminish. Whether existing
dealers choose to enhance their processes or exit the business, the introduction of RVSFs is set to bring
about a significant transformation in the sector.
