Ehsan Haji Amin, Chairman, Ala International and Board Member MRAI, shares with Swaliha Shanavas his views on the recycling industry’s role in environmental protection, the challenges the Indian metal recycling sector is facing, as well as the positive changes expected in the light of the national recycling policy expected to be implemented end 2018.
Tell us briefly about your background and experience in the recycling industry. What brought you into this sector and why would you say the sector has sustained your interest over the years?
Prior to establishing our recycling business in the 1990s, my family was well known as textile industry entrepreneurs for more than 28 years. Such long-term sustainable capacity along with the wish to protect and preserve the environment and natural resources brought me into recycling industry. Today, we can see technology is so advanced that it is helping a lot in combating drastic climatic change.
As the Chairman of Ala International what does your role involve?
Being a key management personnel with Ala Group of companies, there are certain aspects to be focused on: firstly, to create a healthy work place where management is easily accessible to anybody, establish good corporate value, be it to act as an advisor and at the same time provide entrepreneurial leadership and effective controls, which enables risk to be assessed and managed. I am handling diversified profiles as Director of Material Recycling Association of India (MRAI) and Ambassador of Bureau of International Recycling (BIR).
As a board member at MRAI, what does your role involve?
As a board member at MRAI, my role is to develop and protect the interest of country and trade community at large. Being the founder member of MRAI, we firmly believe in encouraging empowerment and keeping ecological balance for a sustainable future to create more employment opportunities to lakhs of potential people. As a founder member, I take the responsibility to extend the best possible support to our existing and new members, taking the lead to drive the membership by organising awareness campaigns and ensuring long-lasting association with all members. More importantly, we involve more of our end-user industries’ membership for a sustainable future.
What is the current state of recycling globally, and what are your views on the development of metal recycling industry in India?
The global recycling market is rising rapidly, largely on account of environmental concerns along with inevitable increases in non-hazardous waste from rapid economic growth (primarily across developing nations) which will drive the demand for waste material including scrap metals. From the depletive ‘produce-consume-dispose’ led linear economy there is a shift towards a ‘reduce-recover-reuse-recycle-redesign-remanufacture’ led circular economy, which is more regenerative and restorative in nature.
India’s rapid economic growth along with rising incomes has created a larger consumer base, leading to growing demand for natural resources and recycling material. As a result, India’s recycling material consumption is expected to triple by 2025 which would offer a viable and sustainable domestic option for meeting the country’s growing material demand.
What are the major challenges facing the metal recycling sector in India and how is MRAI addressing these issues?
The Indian metal recycling fraternity is facing huge challenges largely due to FTA agreement with Asian countries, due to which scrap metal import is being allowed into the country at basic custom duties of 2.5%. However, finished and semi-finished products from overseas are allowed at zero duty in the country under FTAs. There is a clear case of inversion, which needs to be immediately corrected. Therefore, MRAI is continuously following up with the government of India to consider the reduction of Customs Duty on Metal Scrap from 2.50 to zero percent because FTA’s Asian countries are exporting ferrous, stainless steel and non-ferrous metal alloys and Deox at Nil Duty in India, while metal scrap is being imported at 2.5 per cent. With this inverted duty structure any further consideration of increase in duty on metal scrap would lead to an increase in import of metal finished products in India, which will be cheaper than domestic manufacture.
It will also widen the trade deficit and reduce customs duty revenue for the government. The increase of duty will have an adverse effect on the small and medium players of the sector who make products such as alloys by recycling as it will shoot up their input cost.
Besides, the valuation alert dated 01 December 2016 was issued by DGOV regarding import of aluminium scrap fixing the assessable value of aluminium scrap with the London Metal Exchange (LME) price of prime metal with specified discounts thereon. However, as per Section 14 of the Customs Act, the transaction price agreed between the buyer and seller will be treated as the assessable value of goods. This has led to an overvaluation of imported scrap and subsequently the importer has to pay 20-30% extra IGST & BCD. Therefore, we have requested that the Valuation Alert should be kept in abeyance and the assessment of imported goods should be made only on the basis of the actual transaction value thereof. Lastly, the issue related to double taxation on Import Ocean Freight. At present the importers of scrap materials are subject to: a) payment of IGST on CIF (Cost Insurance Freight) value of goods; b) payment of IGST on reverse charge mechanism (RCM) on ocean freight.
As per Section 5(1) of IGST Act, read with Customs Act, 1962, the IGST is required to be paid on the value of goods on CIF basis at the time of clearance of material from the custom station. However, IGST on complete CIF value is calculated and paid by the importer on the value and rate of goods.
Furthermore, some of the other challenges in international trade include: Subsidies for domestic goods; Import policies, including tariffs and other import charges, quantitative restrictions, import licensing, customs barriers, and other market-access barriers; Quotas; Regulations on import quality; Foreign standards and certification information; Government procurement: for instance, “buy national” policies and closed bidding.
What are the barriers to international trade and the specific issues the metal recycling sector is facing due to India’s export policies?
After the implementation of the GST law effective from June 2018, additional 18% GST is now payable on commission earned in foreign exchange by Indian based companies based on the export services provided by them to foreign based principals. Such an imposition of 18 percent GST on the intermediary will lead to double taxation. An intermediary provides service to a foreign principal by sourcing business. Commission paid by foreign principal will be added to the Indian importer’s price, which is subject to custom duty and IGST. The Indian importer is paying above taxes on the price that includes the commission amount of the intermediary. It is not right to have two different taxes on the same transaction/activity. Therefore, MRAI is continuously following up with the Government to remove GST on export of such intermediary services that earn valuable foreign exchange for the country.
What is the status of the National Recycling Policy that the Government of India was formulating? How will this policy help the Recycling industry, especially metals recycling sector?
India’s recycling rates are languishing for a variety of reasons (just 20 per cent as compared to global average of 70 per cent). This is mainly due to the highly unorganised scrap collection scenario in the country. As per the present situation, about 30-40% of the recycling process that is being carried out in the country is in an unorganised manner, which in turn results in environmental pollution.
Hence, the material recycling industry due to unorganised structure is plagued with various challenges at every stage of its value chain: Generation, Processing, Usage, Disposal, thereby creating environmental issues. It suffices to say that we require a more integrated and strategic framework to effectively address environmental issues, enhance productivity and efficiency, and improve recycling and recovery rate.
India is one of the world’s fastest-growing economies poised to peak with material demand for organised structure and the rolling out of Material Recycling Policy to be announced by the end of this year. With the rolling out of this policy, a better organised value chain can be channelised, which shall aid to realise the Indian Prime Minister’s ‘Swachh Bharat’ and ‘Make in India’ initiatives.
Has China’s ban on scrap imports affected the Indian recycling industry in any manner and what changes can one expect in the near future?
Scrap is a valuable commodity used as feedstock in the manufacturing process in countries around the world. Its constant demand demonstrates the longstanding value and need in the global marketplace. Therefore, China’s trash import ban is giving the global recycling industry an enormous headache.
The flip side: the world has finally been forced to rethink its approach to waste. US based International Scrap Recycling Institute (ISRI) warned the ban is disrupting global supply chains and may lead manufacturers to use new materials rather than recycled ones. At the same time, we find China’s ban and change in regulations will continue to redirect global scrap flows with the strong support of improved demand. While respect to China’s ban on category 7 metal scrap effective from January 2018, such categories are banned for the last two decades and special license are required to obtain. Overall,
The Chinese ban is positive for India to develop further with set regulations and issuance of more licenses, which will help provide employment and help to produce more finished products in India and make the dream come true for Indian government’s ‘Make In India’ initiative.
What is the way forward and what is the most challenging aspect?
MRAI board members have a vision of a greener, cleaner earth by promoting recycling of all recyclable commodities in India converting waste to wealth and becoming an eminent force that helps to minimise carbon emission and protect natural resources for sustainable and economic benefits. There is neither strong social awareness nor enough political will to promote recycling as a way of life. Appropriate technologies to maximise recovery from recycling are still nascent. Indian recyclers have no choice but to depend mainly on imports for quality scrap.