JK Tyre challenges retrospective EPR liability, will pass on costs to customers

JK Tyre has challenged the government's attempt to retroactively impose Extended Producer Responsibility (EPR) norms on the industry, according to Dr. Raghupati Singhania, Chairman and Managing Director, in a post-results conference call. The company has, however, set aside Rs 106 crore to cover potential liabilities for the past two financial years, a cost that will likely be passed on to consumers. 

"There is an issue (retrospective imposition)  that we have taken up with the government," said Singhania, while hoping that the Centre will consider it going forward. "Now this costs money," he added before explaining that it will get passed on to the tyre users as it happens in other countries, including the US and EU. The top executive claims that all other manufacturers in the tyre industry are also expected to be taking similar steps.

EPR guidelines and recycling targets

The EPR guidelines, which came into effect in July 2022, set a recycling target of 70% of the weight of new tyres manufactured or imported in FY 2022 for FY24. This target increases to 100% in FY25 and subsequent years. Based on the quantity assigned in the EPR obligation, the producer will accordingly purchase an EPR certificate from a registered recycler.

A producer can also purchase a retreading certificate from the registered retreader for deferment of its EPR obligations. On submission of the EPR certification, the extended producer responsibility obligation shall be deferred by one year for the corresponding quantity of waste tyres. 

According to Singhania, as tyre producers, they are taking care of all the pollution created by them by disposing of and treating the materials. However, in the process of tyre consumption, when the emissions are created, who is responsible? Not the manufacturers, he emphasised. "So therefore, rightly, this obligation, if I may say so, ultimately rests on the consumer," he continued.

Helping transporters with cost savings

The EPR programme is expected to boost the retreading market, which offers significant cost savings for transporters, particularly the smaller ones. Retreading costs 20–50% of a new tyre due to the reuse of the casing, a key component accounting for roughly one-third of the tyre's total cost. Analysts suggest that retreading can be done two to three times while maintaining 80% of the quality of a new tyre, offering substantial economic benefits.

From an environmental standpoint, retreading reduces the carbon footprint by lowering the demand for crude oil derivatives and natural rubber.