RECENT INDIAN POLICY INITIATIVES IN

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UNCTAD WORKSHOP
RECENT INDIAN POLICY INITIATIVES IN LEAD BATTERY
SCRAP MANAGEMENT AND THEIR IMPACT ON THE DOMESTIC
DEMAND-SUPPLY GAP OF LEAD
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Demand-Supply Gap Indian Scenario
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UNCTAD WORKSHOP

• Battery Management Handling Rules - 2001
• The Ministry of Environment and Forests, Govt. of
  India issued the Battery Management Handling
  Rules 2001 on 16 August 2001 with the objective
  of
• Ensuring that maximum amount of used lead in
  batteries is recycled in an environmentally
  friendly manner

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• Ensuring that all concerned people in the
  Chain
• - The users
• - The manufacturers of new batteries
• - The dealers
• - The importers
• - The rebuilders / repairers
• - The small scale manufacturers
• understand their responsibility
• Outlining the rules and monitoring mechanism.

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The rules set the following targets Year 1 50
of new batteries sold Year II 75 of new
batteries sold Year III 90 of new batteries
sold
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Deriving the Demand Governments 9th Plan Demand
estimates till year 2006-7 show
Approx 11 of CAGR
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• Demand for lead depends on the prospects of the
  Lead Acid Battery Industry
• Lead acid continues to be the most cost
  effective couple and is likely to remain so for
  sometime.
• It is believed that 70-75 of all lead used in
  the country is for Lead Acid Storage Batteries.
• The balance 25-30 in other applications e.g.
  cable scathing, gasoline, solder alloys,
  radiation shielding, glassware industry, etc.
• Some estimates state that 75-80 of all lead
  used is for batteries.

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UNCTAD WORKSHOP
The Demand for lead logically would be dependent
upon the applications where batteries are
used. Automotives Cars / Jeeps Trucks Tra
ctors Two wheelers Three wheelers Industria
l Fork Lift Trucks Train lighting /
Railways Power Stations Telecommunications
UPS / Computer back-up power applications Def
ence Submarine applications Typically, the
divide between Automotive and Industrial
applications is 6040 in terms of value and in
the same order of division for lead consumption.
Demand-Supply Gap Indian Scenario
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The Demand patterns for automotive batteries can
be derived as follows Vehicle Production (K
units)
UNCTAD WORKSHOP
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Vehicle population (assuming 15 yrs for cars /
jeeps, 18 yrs for CVs and 17 years for Tractors -
This is a very optimistic assumption)
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Assuming that car batteries last 30 months, jeeps
22 months and CV / Tractors 18 months, the
battery demand in the replacement market is as
follows
UNCTAD WORKSHOP
Batteries required for OEM will be approx. 1.05
1 battery for every vehicle produced as some
commercial vehicles use 2 batteries.
Demand-Supply Gap Indian Scenario
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Going by the above, the total demand of lead
required for manufacture of new batteries could
be derived as follows
UNCTAD WORKSHOP
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UNCTAD WORKSHOP
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Sourcing
It is estimated that about 50 of (III) above are
through Rotary Furnace smelters who may have some
sort of MOEF clearance and the balance 50 is
through Mandir Bhattis and backyard smelters.
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UNCTAD WORKSHOP
Effectively therefore a) There is a demand gap
in that pure lead alloys need to be
imported b) The menace of backyard smelters
needs to be controlled c) There is a need to put
up major smelting capacity for 100K MT in the
country.
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UNCTAD WORKSHOP
To reduce imports and ensure recycling,
important to understand dynamics of the
system Batteries going into OEM will
ultimately return through the replacement
route. For purposes of recycling therefore the
available products / scrap are represented by
the replacement market.
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UNCTAD WORKSHOP
The replacement market in India is divided into a
number of segments a) Trade (Battery dealers /
shops where batteries are replaced on 11
basis) b) Non Trade - Government
departments - Institutional buyers - State
Transport undertakings - Railways -
Electricity boards
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The Replacement market of 6120 K batteries as of
last count was catered to as follows
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• The re-builder / unorganised sector battery
  manufacturers are hungry for scrap batteries as
• They re-use hard rubber containers
• Re-use the negative plates (partial)
• Re-use the separators (partial)
• Re-use small parts
• Sell off the balance lead to the backyard
  smelters

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UNCTAD WORKSHOP
To Re-builder, every part of scrap battery has a
value. To an organised sector manufacturer, only
cost of the metal alone is relevant. -.Thus the
Trader / Small scale backyard smelter actually
pays a much higher price for the scrap. The
question now is why does the re-conditioner /
re-builder of a new battery thrive.
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UNCTAD WORKSHOP
A simple table shows the phenomenon for new
batteries
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UNCTAD WORKSHOP
Thus a Re-builder can afford to sell the product
at 40 cheaper price while realising the same as
an organised sector manufacturer and - have
little or no overhead to support - have a cost
advantage by using re-used components. It is
clear that this sector whose livelihood depends
on the scrap batteries, will continue to pay
higher prices for the scrap.
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UNCTAD WORKSHOP
What do these higher prices mean to the dealers
of organised sector manufacturers. A typical
example of a car battery New Battery Consumer
Price 2000 Dealer Price 1680 Dealer
margin 320 30 Income Tax 96 Net
margin 224
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UNCTAD WORKSHOP
The equation on selling back used battery to
organised sector manufacturers (where it has to
be a clear transparent transaction) vs. selling
it to a trader who deals in cash is as follows
Thus the dealer has potential to make nearly 30
more profit (84-20) ? 224 on a typical
transaction if he goes to a Trader
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If margins through tradershas to be equalised,
The organised sector manufacturer would find
this transaction totally unviable. This is a key
issue - and difficult to resolve since most of
these traders are non-registered At such a
high scrap price, any smelting unit with
environmentally sound controls, would not be
viable.
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UNCTAD WORKSHOP
Current pricing of scrap distorted
International scrap prices are at 150/MT, the
same in India commands a price of 300 - 350 /
MT if not more. The real issue therefore in
addressing the supply and demand is to ensure
channelisation of the scrap at reasonable prices
to the organised sector smelting operation -
making the operation viable.
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UNCTAD WORKSHOP
While legislation is a major step in the right
direction, the focus of the legislation will have
to take mid-course corrections and will have to
be a) Severe in closing down backyard
smelting b) Cutting at the roots - the
re-building and unorganised sector new battery
businesses because of which the backyard smelters
thrive.
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UNCTAD WORKSHOP

• SMELTING OPERATIONS IN INDIA
• Rotary Furnace
• Usually installed by the organised sector.
• capital cost relatively high
• recoveries relatively efficient.
• normally hooked up with the pollution control
  equipment.
• Mandir Bhattis
• Kachha structures made from brick and - shape
  of the furnace looks like a temple, hence the
  name.
• capital cost is low
• recoveries not as efficient as Rotary Furnaces.
  
• used mostly by the unorganised sectors without
  any pollution control equipment
• operate mainly from sunset to sunrise.

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UNCTAD WORKSHOP
Critical Issues Demand supply gap of 60-70 KMT
being filled in by backyard / unorganised
smelters who do not have MOEF clearance
Organised secondary lead producers face severe
shortage of raw material What they do get is
at unviable and high prices. These projects
therefore cannot sustain themselves as
businesses.
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UNCTAD WORKSHOP
Critical Issues Price of spent batteries for
viability should be around Rs 5000 / Rs 7000 per
MT (USD 100-150 / MT as against current
collection prices of Rs 18000 / USD 380 / MT.
While Legislation will increase the input of
scrap It will address the problem only at the
level of the visible entities like the
registered users in the organised or registered
small scale sector who comprise and cater to
about 50 of the market.
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UNCTAD WORKSHOP
Critical Issues Large scale battery
manufacturers are the most visible to the
regulation bodies, and as a result, will have
whatever effective measures are being taken but
they represent only 50 of the new battery
market. Unlike in developed economies where
the responsibility is assigned primarily to the
consumer, in this case the responsibility for
collection of scrap batteries has been focussed
on manufacturers.
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UNCTAD WORKSHOP
Critical Issues The return of scrap in the
market takes place under market economy
syndrome whereby a small scale
manufacturer a) Re-uses the plastic or hard
rubber containers b) Re-uses the
separators c) Re-uses the negative plates To
that extent, pays a much higher price for scrap
than the organised sector battery manufacturer
who is prepared to pay only to the extent of the
lead metal content in the battery.
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UNCTAD WORKSHOP
Critical Issues Small scale collector works
on cash basis - avoids all taxation which
could range between 30-40. Transactions with
the organised sector battery manufacturers are
transparent transactions. The element of
30-40 makes all the difference in the routing of
the product into the unorganised sector vs. it
going into the organised sector.
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UNCTAD WORKSHOP
There is not enough environmentally friendly
smelting capacity in the country. Some of the
smelters who apparently have State Pollution
Control Board No objection do not have adequate
capacity - themselves rely on unorganised
mushroom smelters in different areas
sub-contracting out the jobs.
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UNCTAD WORKSHOP

• Some recommendations
• A fundamental socio-economic problem will have to
  be solved through
• massive awareness amongst
• Consumers
• Manufacturers
• Unorganised smelters
• Punitive action at that level
• Creating alternate employment opportunities
• - considering that livelihood of a very
  large number (running into thousands) across the
  country is dependent on this backyard trading
  manufacturing

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UNCTAD WORKSHOP
Government to encourage private enterprise to set
up environmentally friendly smelting operations
allowing - duty free import of capital
equipment - allotment of land-sites for
collection of hazardous wastes - concessions in
taxation in case of smelting operations (it
is clear that the taxation is creating the
economic gap) There does not appear any
immediate and short term magic
solution. Private enterprise and government will
have to work concertedly as a team to solve this
problem.
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UNCTAD WORKSHOP
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