The Ministry of Steel’s scrap policy, which will be finalised by the third quarter of this financial year, has left white goods makers in despair.
The policy will require companies to redesign products to ensure that they can be recycled easily, a proposal that could push up manufacturing prices by 20 percent. This will in turn push up the retail prices, a scenario that the companies are wary of in a slowing economy.
Detailing the role of white goods OEMs (original equipment manufacturers), the government has proposed that these firms should design the products to contain safer materials that are easier to recycle and reuse. Here, the goods include refrigerators, washing machines, ovens, air conditioners, stoves and cookers.
The policy has left the companies perplexed.
“Products or a few of their components are designed in other parts of Asia including places like South Korea and Japan. There is a set pattern of design that is followed for across markets. Having a deviation would mean production costs would go up,” said the India CEO of global appliance maker.
The head of home appliances of a global white goods firm added that the additional costs would be passed on to customers in the form of a higher retail price.
“The costs will go up at least by 20 percent. We should also be given incentives for import of greener products, that will encourage companies to go greener and also offset the rise in designing costs,” he said.
That will be important to drive sales rest of the year, even though the sector has been an outlier till now.
How will it work?
The government has proposed that white goods OEMs should inform the consumers about the special incentives provided by manufacturers on new products upon exchange or scrapping of end of life products.
This means the shelf-life of every product will be decided at the time of purchase. The consumer will be encouraged to return the appliance to the manufacturer and get discounts on purchase of new products.
However, the head of consumer appliances at an Indian conglomerate said that not all companies have the facility of dismantling older goods.
“The government has suggested a six-month deadline and it would be difficult to dismantle them so soon. Further, if there is a discount given there will be a huge rush of customers wanting to exchange their products,” he added.
Here, the owner has to give an undertaking to show that he/she is the legitimate owner of the goods and also give consent for recycling.
The scrap policy is applicable for automobile and white goods firms. While each motor vehicle running on Indian roads has a shelf life (on an average 15 years), it is the vehicle owner’s responsibility to ensure that they replace the car/bike. For example: If a car has a shelf-life of 15 years, the owner can be apprehended by the traffic police for driving it beyond that period.
However, in the case of white goods it is not clear how the process will be implemented. Unlike RTO that has a clear record of all the vehicles brought in the country, white goods players do not have any such centralised data. Hence, even if a cooker was to be unfit for use after 20 years, there will be no way to ensure that the customer exchanges it.
Further, white goods makers said that third-party agencies involved in recycling also do not have a proven track record in India to be able to dispose hazardous way efficiently. Fines, if any, will be imposed on the manufacturers, and the onus is on the makers of the white goods to ensure that waste is disposed properly. Money Control