Dear Shri Piyush Goyal Ji,
Building upon my email to you yesterday regarding the Dual Scrapping Strategy for end-of-life (EoL) vehicles and ships, I am pleased to present a concrete, quantified proposal for a barter deal between India, the United States, and the European Union. This proposal leverages the scrapping of EoL vehicles and ships to create mutual economic benefits, reduce costs, and enhance sustainability. Inspired by Verghese Kurian’s innovative approach to securing free milk powder from Denmark, we propose a similar “win-win” strategy where both sides save and earn significantly.
The Proposal: A Barter Deal for Steel Scrap
We propose that the US and EU deliver a portion of their EoL vehicles and ships to Alang, Gujarat, free of cost, where India’s world-class shipbreaking and emerging vehicle scrapping infrastructure can process them. In return, India will supply a fraction of the resulting steel scrap back to the US and EU, delivered free to their designated ports. This barter deal eliminates tariffs (as 100% tariff on a zero selling price is zero) and ensures both sides gain economically and environmentally.
Below, we outline the quantified benefits, supported by the latest available data, to demonstrate the savings and earnings for all parties.
Key Data and Quantified Benefits
1. US and EU: EoL Vehicles, Scrap Generation, and Trade
Annual EoL Vehicles Scrapped:
US: Approximately 12 million vehicles are scrapped annually. Assuming an average vehicle weight of 1.5 tons, with 70% being steel, this generates ~8.4 million tons of steel scrap per year (12 million × 1.5 × 0.7).
EU: Around 6 million vehicles are scrapped annually, yielding ~4.2 million tons of steel scrap (6 million × 1.5 × 0.7).
Local Steel Industry Usage:
US: The US steel industry consumes ~30 million tons of scrap annually, with ~25–30% of scrap supply managed by mill-owned scrap yards. The US exports ~15 million tons of steel scrap annually at an average price of $400 per ton, earning ~$6 billion in foreign exchange.
EU: The EU consumes ~50 million tons of scrap annually but faces a projected shortage of 10–15 million tons by 2030. It exports ~20 million tons at ~$400 per ton, earning ~$8 billion annually.
Scrap Imports:
US: Imports ~5 million tons of steel scrap annually at ~$450 per ton, costing ~$2.25 billion.
EU: Imports ~10 million tons at ~$450 per ton, costing ~$4.5 billion.
Cost of Disposal:
Disposing of EoL vehicles domestically costs ~$100 per ton in the US and EU due to transportation, labor, and environmental compliance. For 12 million tons (US) and 6 million tons (EU), disposal costs are ~$1.2 billion and ~$600 million, respectively.
2. India: Vehicle Scrappage Policy and Steel Scrap
Annual EoL Vehicles: By 2025, India expects ~2.25 million vehicles (including two-wheelers and commercial vehicles) to reach EoL, generating ~9 million tons of steel scrap (approximating 2022 import levels). By 2030, this is projected to grow significantly.
Scrap Usage and Imports:
India’s steel industry consumes ~20 million tons of scrap annually but faces a shortage, importing ~10 million tons in FY2023 at ~$450 per ton, costing ~$4.5 billion.
India exports negligible amounts of steel scrap due to domestic demand.
Scrapping Infrastructure:
India has limited automated fitness test centers (7) and scrappage centers (2), but Alang’s shipbreaking capacity is world-leading, processing ~700,000 tons of ship steel annually. Expanding vehicle scrapping could leverage this expertise.
National Steel Policy (2017): Targets 230 million tons of steel production by 2030, with scrap playing a critical role in reducing CO2 emissions (currently 2.5–2.85 tons per ton of steel vs. global average of 1.4 tons).
3. Proposed Barter Deal Mechanics
US-EU Contribution:
The US and EU send 2 million EoL vehicles annually to Alang (1.5 million from the US, 0.5 million from the EU), yielding ~3 million tons of steel scrap (2 million × 1.5 × 0.7).
Additionally, 50 EoL ships (average 20,000 tons each, 80% steel) yield ~800,000 tons of steel scrap (50 × 20,000 × 0.8).
Total Scrap Generated: ~3.8 million tons annually.
Cost Savings for US-EU:
Domestic disposal cost avoided: 3 million tons × $100/ton = $300 million annually.
Shipping cost to Alang: ~$50 per ton (cheaper than sea dumping, as per Kurian’s logic). For 3.8 million tons, total shipping cost = $190 million.
Net Savings: $300 million - $190 million = $110 million annually.
India’s Contribution:
India returns 10% of the scrap (380,000 tons) to US-EU ports, free of cost.
India retains 90% (3.42 million tons) for domestic use, reducing import needs.
Cost Savings for India:
Import cost avoided: 3.42 million tons × $450/ton = ~$1.54 billion annually.
Shipping cost for 380,000 tons to US-EU: ~$19 million ($50/ton).
Net Savings: $1.54 billion - $19 million = ~$1.52 billion annually.
Additional Benefits:
US-EU: Reduced import bills, access to high-quality scrap, and compliance with carbon border adjustment mechanisms (e.g., EU’s CBAM).
India: Boosts domestic scrap supply, supports National Steel Policy, reduces CO2 emissions, and creates jobs (e.g., Tata Motors’ Bhubaneswar facility employs hundreds).
Why This is a Win-Win Deal
For US-EU:
Saves $110 million annually in disposal costs.
Secures 380,000 tons of free scrap, reducing import costs by ~$171 million ($450/ton × 380,000).
Avoids export restrictions and tariffs, enhancing trade flexibility.
For India:
Saves ~$1.52 billion annually in scrap import costs.
Enhances steel industry competitiveness and supports decarbonization goals.
Leverages Alang’s infrastructure, creating jobs and reducing reliance on imported scrap.
Global Impact: Promotes circular economy principles, reduces pollution, and aligns with global net-zero targets.
Implementation Steps
Negotiate with US-EU Trade Bodies: Engage with the US Department of Commerce and EU’s DG Trade to formalize the barter agreement, highlighting mutual savings.
Expand Alang’s Capacity: Invest in automated scrapping facilities to handle 2 million vehicles and 50 ships annually, leveraging Tata Steel’s auto shredding model.
Streamline Logistics: Partner with shipping companies to optimize transport costs, ensuring savings exceed disposal costs (as in Kurian’s model).
Policy Support: Amend India’s Vehicle Scrappage Policy (2022) to incentivize foreign EoL vehicle imports with tax rebates, mirroring US and EU incentives.
Public-Private Collaboration: Involve Tata Steel, ArcelorMittal, and global players like Schnitzer Steel to ensure efficient scrap processing and distribution.
Conclusion
This barter deal offers a compelling economic case: the US and EU save $281 million annually ($110 million disposal + $171 million import costs), while India saves $1.52 billion in import costs. By replicating Verghese Kurian’s logic, we turn a costly disposal problem into a profitable opportunity, fostering sustainability and strengthening India’s steel industry. I urge you to pitch this proposal to US and EU trade negotiators, emphasizing the quantified benefits and India’s readiness to lead in global scrap recycling.
Yours sincerely,
Hemen Bhai
Sources:
India’s Vehicle Scrappage Policy and Steel Scrap Data:
US-EU Scrap Statistics and Trade:
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