Business, Economy, Government

Dying scrap markets ask for industrial area tag

While the formal automobile sector debates the scrapping policy, India’s large informal automobile spare parts and scrap market is dying away.

Old vehicle scrapping policy was a thrust that the automobile industry expected in this year’s budget on one of the rare occasions when environmental arguments and industry demands voiced the same note.

The policy if implemented would cut harmful emissions, increase sales for automobile manufacturers, improve overall fuel efficiency in the economy, reduce the import of oil, multiply government revenue through taxes levied on purchase of new vehicles, and reduce the dependence on steel imports as the old metal would be melted for recasting.

The resistance to this policy comes from pensioners, medium-income and cash-strapped owners who wish to maintain the vehicle and refuse to replace their old car with a new one by spending saved up cash or by taking a loan. Exchange schemes run by automobile companies and the argument that purchasing a new vehicle would offset the maintenance cost doesn’t beat the significant at-a-time investment the buyer would have to make.

Since the service tax was kept unchanged this year, the after sales service cost will remain the same. However, it would still remain high at company service centres. Earlier, people would go to Pudupet or other auto spares market, which catered to their requirement of a low-cost and low-skill maintenance job, such as fixing a broken tail light. Now, such markets can’t compete with the wide-spread network of dealerships and fast-moving, newly-styled models, according to Chandramouli S, Madras Motor Parts Dealers Association.

Markets like Pudupet gathered the scrapped auto parts and pumped them back into the system by selling them to notified agencies such as the government controlled company for trading in metal scrap, Ministry of Steel Trading Company (MSTC).

“The scrap business is not our business. But, we would direct the scrapped parts lying with us to steel furnace units. When it comes to new parts, nowadays, we procure it from distributors through proper channels, by paying taxes and producing bills. Gone are the days when parts could be stolen or smuggled. We can procure old-design parts in that manner but not for latest design,” said Mohammad Ali Irfan, who runs his father’s auto spares shop in Pudupet.

Irfan, a graduate in English Literature, is preparing for law entrance exams. He believes that the informal spare parts business will shut down in 10 years and with it the scrap business.

Although people still visit the market for an odd spare part, Aarif, Irfan’s brother said that the footfall has nearly halved since the Chennai floods. Engines with choked oil and water couldn’t be sparked to start. Days of resting in water-filled clogged roads led to rusting of inner parts. Now, Irfan and Aarif sell head light, tail light, bumpers, alloy wheels and tyres. The scrap generated with these products – mostly plastic and rubber – get dumped at a nearby dumping site.

“Since we can’t pay high prices and procure latest-design parts, people don’t come to us,” said Irfan. And, the absence of a scrapping policy has led to dumping yards with mountains of discarded parts that pass neither through company service centres nor through informal spare parts markets.

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