– By Sakshi Garg and Rahul Mazumdar
The industrial development, anchored on an inherently linear model based on “take- make- waste” approach has had a debilitating impact on the environment. Alarmingly, 2023 was the world’s warmest recorded year as per the National Oceanic Atmospheric Administration. Furthermore, in the last fifty years, the use of materials globally has almost quadrupled, outpacing population growth as per Circular Gap Report 2022. This calls for urgent global action to incorporate systemic changes in production and consumption models.
Circular economy (CE) provides solutions to transform the current linear economy into one where the life cycle of products is maximised, and waste is minimised. CE is a production and consumption model centered on sharing, leasing, reusing, repairing, refurbishing, and recycling materials and products for as long as possible.
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Issues in key industries
Based on an analysis of four export intensive sectors -textiles and apparels; electronics; automobiles; and metals, it is observed that in all the sectors, the extraction processes for raw materials remains unsustainable. The share of these four industries stood at 8%, 5%, 2% and 8%, respectively in India’s total exports in FY 2023.
According to the Water Footprint Network Research, in the textiles and apparel sector, India being the largest producer of cotton comes with the associated cost of strained groundwater reserves as producing 1 kg of cotton takes up to 22,500 litres of water, even higher than the global average of 10,000 litres.
Similarly, the major use of virgin minerals and rare-earth elements in the electronics and automobiles sector, for many of which India is completely import dependent, raises concerns about the continuous supply of resources.
The more sobering issue, however, is the underutilisation of the growing waste streams in these sectors. In the clothing and apparel sector, recycling is not keeping pace with the exploding consumption. According to Ellen Macarthur Foundation, less than 1% of material used to produce clothing is recycled into new garments, leading to loss of value in billions of dollars every year.
In electronics, which is one of the world’s fastest growing waste streams, India ranked as the third largest e-waste generator in 2019, after China and the USA as per the Global E-Waste Monitor 2020 Report. India’s e-waste recycling rate reported by the Ministry of Environment, Forest and Climate Change was only 32.9% for FY 2022, pointing at the high underutilisation of waste.
Similarly, India’s recycling ecosystem for end-of-life vehicles is still at a nascent stage and the recycling rates of metals are below the global benchmark recycling rates.
It is clear that accelerating transition to CE is the need of the hour. The first step towards achieving a CE is to build a robust ecosystem for secondary raw materials (SRMs) in the country. SRMs are materials recycled from end-of-life products or waste that re-enter the manufacturing process as inputs and have the same functionality as virgin materials. Needless to stay, robust recycling systems are a prerequisite for ensuring availability of quality SRMs in the market. In India, although recycling clusters in the focus sectors i.e. textiles and apparels, automobiles, electronics, and metals are plenty, they are mostly unorganised in nature, devoid of uniform standards, safe working environments and mostly focussed on domestic consumption only. Improvements at every stage are thus required.
Select solutions
To start with, the waste collection processes in all the sectors need to be standardised to minimise contamination. While such developments are already taking place in the automobile sector through the scrappage policy for End-of-Life Vehicles (ELVs) and in the electronics sector through the E-waste management rules 2022, the coverage currently remains very limited.
To illustrate, there were a total of 569 dismantlers/recyclers authorised by the State Pollution Control Boards / Pollution Control Committees (PCCs), with a recycling capacity of 17.9 lakh metric tonnes per annum (MTPA) as on 08-06-2023 while the quantum of e-waste exceeded 30 lakh MTPA in 2019 itself. By providing adequate incentives to the stakeholders including waste generators, waste collectors and waste processors, the collection and recycling processes can be scaled up.
Uniform rules also need to be implemented for other sectors like textiles.
Further, for scaling up recycling, the role of the existing informal recycling clusters such as for textiles in Panipat and Tirupur and for automobiles in inter alia, Mayapuri , Meerut, Pudupet and Ukkadam, cannot be ignored. Although running for years, these clusters lack uniform standards, adequate technology, and safe working conditions. For example, in textiles, most recycling units in India are not able to produce high-quality recycled yarn due to technological limitations because of which they fetch low prices for their products and are mostly utilised in domestic market.
The advanced recycling technologies remain inaccessible due to large investments required. To enable their formalisation, recycling parks with state-of-the-art common facilities need to be set up so that the small units may avail the facilities. Comprehensive trainings may also be provided to the recyclers regarding the best practices to be adopted with focus on building export capabilities parallelly.
Demand side
On the demand side, the manufacturing companies need to be nudged to increase the use of SRMs in production processes through lucrative financial schemes like offering annual corporate tax benefits to producers who exceed the stipulated minimum percentage use of SRMs in their inputs.
Circular objectives and green public procurement criteria may also be incorporated in India’s trade agreements with partner countries. With the negotiations between India and the EU for an FTA going on, India has the opportunity to harmonise standards for waste recycling in cooperation with the EU which has been a pioneer in introducing circular economy related measures such as the Circular Action plan 2015 and 2020.
It may be observed that the European Parliament has recently passed the European Commission’s (EC) proposal for introducing mandatory and uniform Extended Producer Responsibility (EPR) schemes for textiles in all EU Member States, under which producers will be responsible for the full lifecycle of textile, textile-related and footwear products. The EC envisages that by 2030, all textile products placed on the EU market be durable, repairable, and recyclable. In a similar vein, EC’s proposed critical raw materials act aims to strengthen all stages of the critical raw materials value chain by improving circularity and recycling.
On similar lines, India needs to step up its transition towards a circular ecosystem and establish working groups for the same with other countries to ensure unhindered exports and cater to the growing demand of SRMs in the EU and elsewhere.
In conclusion
In all, CE cannot be strengthened in silos at the domestic level. International trade and global value chains play a key role in accelerating the transition and in building economies of scale in the sector. Besides, with countries increasingly imposing stricter Environmental, Social and Governance (ESG) regulations in their economic engagements with other countries, transition to circular practices becomes a necessity. It is thus an opportune time for India to establish robust recycling systems and emerge as a leading supplier of secondary raw materials.
(Sakshi Garg and Rahul Mazumdar are economists with India Exim Bank.)
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