Environmental

Market Potential of Waste Engine Oil Recycling in India

Introduction

Throughout the world, the recycling of used engine oil from vehicles is becoming increasingly important. Used engine oil, after it is drained from a vehicle, is a serious environmental hazard if not disposed of in a correct manner. Used engine oil is filled with toxic heavy metals, sludge, soot of carbon, and aged additives that, if discarded in the ground or water, may cause extreme pollution. But when it is well-collected and reprocessed, it is a worthwhile product that can be transformed into new lubricants, industrial fuel, or even biodiesel.

The global automotive oil recycling industry was worth about USD 53.79 billion in 2024. It is anticipated to rise to USD 77.73 billion by 2032 with a compound annual growth rate (CAGR) of 5.4%. Increased vehicle ownership, more stringent environmental laws, and technology improvements in oil re-refining are fueling this growth. North America and Europe are spearheading this trend because of existing infrastructure and tough disposal standards. However, Asian countries, especially China and India, are catching up fast because of increasing environmental consciousness and an exponential rise in vehicles.

In India, 2025 represents a turning point for the waste engine oil recycling sector. India generates around 62 million tonnes of waste annually, and plastic, electronic, and hazardous waste volumes are increasing rapidly. With new government policies, greater implementation of sustainability patterns, and enhanced technological capacity, the industry will experience tremendous growth.

Wondering about the market drivers, current situation, opportunities, and challenges in waste engine oil recycling in India? Go through this amazing writeup to get a fair overview.

Understanding Waste Engine Oil and Its Impact

Waste engine oil is the lubricating oil drained from vehicle engines after usage. Throughout its working life, engine oil is subjected to thermal and mechanical stress, picking up contaminants like heavy metals, carbon particulate, water, sludge, and oxidized additives. This makes the oil useless in its current form and makes its disposal a dangerous process.

If disposed of incorrectly, like dumping into sewers, landfills, or the ground, waste engine oil can pollute water supplies, harm aquatic life, and decrease the fertility of soil. Recycling is thus both environmentally essential as well as economically wise.

The recycling process consists of:

• Collection: Accumulating waste oil from industrial generators, vehicle repair shops, transportation fleets, and service centres.
• Pre-treatment: Separation of suspended solids, water, and sludge using mechanical separation and filtration.
• Refining: Using sophisticated methods like hydroprocessing, clay filtration, thin-film evaporation, and vacuum distillation to recover base oil.
• Blending and Packaging: Refurbishing base oil with essential additives so that the performance is equivalent to fresh lubricants before sale.

Recycling waste engine oil provides the least resource loss, aids in environmental protection, and facilitates economic recycling of a valuable resource.

India generates more than 1 million kilolitres of used oil every year, of which only a small portion is officially collected and re-refined. The remaining either contaminates the environment or is handled in unregulated facilities.

Types and Applications of Recycled Engine Oil

Reused engine oil is used in various downstream applications that are not just related to motor vehicle use:

• Base Oils: Re-refined base oils are essential for making new lubricants and are apt for motor vehicle, industrial, and marine engine use.
• Industrial Fuel: Certain waste oil varieties are employed straight or with some processing as furnace fuel, cement kiln fuel, and fuel for industrial boilers.
• Biodiesel Feedstock: Used lubricants and cooking oils, after processing, are turned into biodiesel. Such biodiesel is being used more and more in transportation, lowering carbon emissions.
• Bitumen Additives: Utilized in road building, where waste oils enhance the flexibility and durability of asphalt mixtures.

Types of oil processed in recycling are:

• Lubricating Oils: Most recycled oil, collected from all vehicles.
• Hydraulic Oils: Heavy machinery contains it; recycled after draining water and fine solids.
• Transformer Oils: Need to be high-purity refined because of insulation regulations.
• Cooking Oils: Commonly used within the food business; increasingly being diverted from drains to biofuel production.
• Gear and Compressor Oils: These need specialized re-refining processes because of chemical stability needs.

Every category is a particular treatment challenge, but meaningfully contributes to the recycling economy.

COVID-19 Effects on the Waste Oil Recycling Industry

The emergence of the COVID-19 pandemic in the early part of 2020 had a catalytic effect on the waste oil recycling business. Lockdowns across the world, restrictions on travel, and factory closures minimized automotive mobility and manufacturing output, leading to reduced waste oil generation. This found direct expression in the reduced availability of feedstocks for recycling facilities.

Pandemic Challenges were:

• Shortages of Labor: Most workers were absent due to health hazards or emigration.
• Disruptions to Supply Chains: Networks for gathering waste oil were severely disrupted.
• Operational Restraints: Recycling plants functioned at less than full capacity owing to social distancing protocols.
• Delayed Investments: Uncertainty regarding finance resulted in delayed investment in recycling infrastructure.

Despite the disruption, the pandemic sped up public debate regarding sustainability, resource security, and industrial resilience, contributing indirectly to long-term interest in recycling activities.

Market Outlook Till 2025 and Beyond

The worldwide waste oil recycling market is heading towards growth, projected to expand from USD 65.29 billion in 2025 to USD 83.47 billion by 2029. The push behind this growth comes from industrialization, energy security issues, and regulatory drives for cleaner practices.

In India, the waste oil recycling industry, worth USD 4.05 billion in 2025, is expected to grow to USD 6.37 billion by 2033. The growth will be driven by:

• A growing vehicle population is producing more waste oil.
• Increased environmental regulations.
• Investment by multinational companies and domestic startups with newer refining technologies.
• The government focuses on the circular economy and import substitution.

As the above trends gain momentum, India’s recycling business will see major consolidation and professionalization.

India’s Automotive Engine Oil Market and Import Reliance

India is the third-largest lubricants market in the world, with total consumption around 4.2 million metric tonnes (MMT) in FY 2021-22. Engine oils for vehicles are the largest portion of the market based on the increased number of passenger and commercial vehicles.

Although there is a high amount of consumption, India’s domestic base oil production remains low. In 2023, base oil refining capacity was only 1.41 MMT/year. In the first six months alone of FY2024- 25, India imported more than 1.54 MMT of base oils. Reliance on imports both pressures our foreign exchange reserves and creates potential strategic risks.

Re-refining used engine oil is one way to help alleviate this pressure. It gives us domestic sourcing for expensive imported crude-based base oil and, second, it has a lower environmental impact.

The Current Landscape of Engine Oil Recycling

With such a high volume of engine oil used and drained each year, the recycling rate of used oils in India is very low. About 257 registered recycling units are operating across 19 states in India, but the actual volume of engine oil that is recycled is far below the potential. The most commonly used engine oil is either:

• Sold informally and burned as furnace oil,
• Improperly disposed of into land or water sources,
• Or lost due to a lack of formal collection channels.

The informal sector dominates this space. Waste oil is often collected from workshops and service centers by unregistered dealers who do not follow environmental or safety guidelines. This not only leads to pollution but also undermines the development of a legitimate recycling ecosystem.

New Regulations: Extended Producer Responsibility (EPR) for Used Engine Oil

To address the gap between oil consumption and recycling, the Government of India initiated a mandatory Extended Producer Responsibility (EPR) regime for used oil starting April 1, 2024. The regulation applies specifically to:

• Producers of engine oils and lubricants,
• Importers of base oils or used oils, and
• Anyone selling automotive oils in the Indian market.

Under the rule:

• Companies will need to ensure that a proportion of the oil they sell is recycled in advance on an annual basis.
• The obligations will start at 5% in FY2024-25 and increase to 50% by FY2030-31.
• The company will fulfill this obligation by purchasing EPR certificates from registered recyclers.

The Central Pollution Control Board (CPCB) has launched an online platform to manage registration, reporting, and certificate trading. All producers, recyclers, and collection agents need to register on the platform and submit periodic returns.

As regulated behind a compliance framework, waste engine oil is now a tradeable product and a formal incentive for recycling. For the investor community, this presents a clear investment opportunity to build capacity in certified re-refining and oil recovery. Meeting requirements of EPR for waste oil is crucial.

Challenges Facing Engine Oil Recycling in India

Although the India policy framework is helpful, it does not dissolve the obstacles to doing used engine oil recycling in India:  

1. Weak Collection Infrastructure

Almost all vehicle service stations, garages, and most transport hubs lack any organized collection of waste oil. Informal actors predominate in this stage, and leakages are common, and sales are untraceable.

2. Limited Awareness

Vehicle owners and small mechanics create a negative market demand due to their ignorance of environmental damage. Used engine oil is disposed of down drains, discarded in landfills, mixed with most automotive or light vehicle fluids to appear less toxic, or burned.

3. Quality Perception

Used engine oil is generally perceived as bad. If the original oil is not re-refined well with proper use of up-to-date re-refining technology, the re-refining final product may appear visibly darker or have some residues. The downstream market for re-refined used engine oil is discredited, and they may prefer new oil to a re-refined product.

4. Costs

It takes money for a modern re-refining facility to operate, and this facility needs technically skilled workers and to comply with laws and be committed to environmental laws. This inability to realize the capital for initial investment, certification, and/or incentivizing beneficial use by small entrepreneurs limits the use of engine oil recycling.

5. Unregulated Informal Sector

A portion of the waste oil stream ends up in the black market, where it is sold or used with no safety or climate safeguards. The black market

Also creates additional problems for legitimate recyclers because it diminishes the need for the collection of feedstocks that ultimately belongs in high-grade recycled streams.

Investment Opportunities in Engine Oil Recycling

Despite these challenges, the waste engine oil recycling industry in India has enormous potential, especially since the EPR regulation is now being implemented. Some important areas to invest, or partner, include:

Establishing Modern Re-refining Plants

Recycling obligations will be increasing and, as a result, required EPR certificates (required to maintain oil production levels) will see rapid increases in demand. The recycler who follows the rules and receives EPR certificates will be able to sell them at a premium to the regulated oil producers. If using vacuum distillation and hydro-treatment the recycler can produce good quality base oils that will find a market.

Establishing a Means of Collection in Urban Areas

A company could invest in a logistics system to collect waste engine oil from workshops, fleet operators, or urban service centres. Working with OEMs/OEM dealers and municipal waste services networks will help ensure a regular supply of used oil to the re-refiner.

Digital Solutions

Investors could also invest in digital-based platforms capable of tracking the used oil collection, storage, and delivery service, which includes GPS and geographic user interfaces. Digital-based platforms have the advantages of increasing transparency and compliance with stakeholders and building trust with regulators.

Branding and Blending

A company can develop branded lubricants that include re-refined base oil. There is a growing market for branding with the words “eco-friendly,” and with climate concerns, it’s possible this will appeal to fleet operators and institutional buyers.

Collaboration with Auto OEMs

Auto manufacturers and service networks generate large quantities of waste engine oil. Investors can propose long-term partnerships to collect and recycle oil from service centers.

Environmental and Economic Benefits

There are many direct and indirect benefits to recycling engine oil:

Reduces Crude Oil Imports

In India, a considerable volume of base oil is imported to manufacture lubricants. Each tonne of re-refined base oil decreases the volume to be imported and saves foreign exchange.

Reduces Greenhouse Gases

The process by which oil is obtained from crude is very energy-intensive. Re-refining used oil employs about 50% less energy and dramatically lowers CO₂ emissions.

Eliminates Pollution

One litre of used engine oil can contaminate one million litres of water. Safe collection and recycling mean that pollution of soil, air, and water does not happen.

Generates Jobs and Revenue

Formal collection, transportation, and refining create jobs and tax revenues for local governments. The 2025 vision of India’s circular economy is projected to produce $2 trillion of value by 2050 and create 10 million jobs, according to the MoEFCC.

Helps to Meet Circular Economy Needs

Ensuring a product is used as many times as possible before disposal can be seen as the core objective behind India’s mission for sustainable development. Recycling of waste oils is a perfect example of this kind of model.

Government Support and Industry Response

The Ministry of Environment, Forest and Climate Change has backed the EPR model with detailed operational guidelines. CPCB’s registration and tracking system allows for transparency with punitive consequences for non-compliance. Public-private partnerships and pilot programs are encouraged in all states.

Associations, such as FICCI and REIAI, are working with recyclers and oil producers to ensure smooth implementation. Awareness campaigns and training programs for small mechanics and transporters are present in several states.

Several major oil companies have begun to actively plan for formal return schemes for waste engine oil. This includes established fixed collection points (beyond waste oil generated by vehicle dealerships) and collection services in relation to regular dealership services.

Significant Developments and Industry Players

Significant news includes:

• An organized used oil management was initiated by Shell India to promote collection and recycling in a structured way.
• In 2024, Veolia introduced a significant expansion to its waste oil recycling capacity, having implemented more sophisticated purification systems.
• Safety-Kleen launched low-carbon recycling processes that support reductions of up to 10 kg of CO₂ offset for every 10 kg of re-refined base oil produced.

Top Companies active in India or around the globe include:

• Veolia
• Safety-Kleen
• Vertex Energy
• GFL Environmental
• MidStates Oil Refining
• Universal Lubricants
• Southern Oil Refining

The Road Ahead: Building a Sustainable Engine Oil Recycling Ecosystem

India’s success in engine oil recycling is dependent on how well the ecosystem can scale up over the next five years. In order to work towards meeting the ambitious EPR targets, the following needs to happen:

• Consumer and mechanic awareness campaigns are needed.
• Financial incentives or subsidies for collectors and recyclers.
• Coordination at the state level to bring the informal collectors into a formal supply chain.
• Investments in refining, blending, and logistics.
• Standardization and certification to ensure quality and market legitimacy.

Waste oil recycling will also play an important role in helping India achieve the net-zero carbon emissions target by 2070, through reducing oil imports, reducing the emissions footprint during virgin oil production, and enabling clean fuel alternatives like biodiesel.

Conclusion

India stands at a transformative moment in its journey toward sustainable waste management, with waste engine oil recycling emerging as both an environmental necessity and a high-potential economic opportunity. With millions of vehicles generating many millions of liters of used engine oil every year, there is an ample supply to recover and reuse. Corporate regulations, technological advancements, and growing lubricant market demand are creating a positive climate for growth in this sector.   

The next few years will be very important for this opportunity. If strategic investment is made in waste oil infrastructure, public education, and inclusive policies, it may transform this industry from a regulatory requirement to a fundamental asset of India’s circular economy. For investors, a waste engine oil recycling model will increase investor confidence in building scalable, impact-driven ventures. For society, it means cleaner environments and more prudent resource use.                 

In conclusion, it is safe to say that waste engine oil is no longer a waste product, it is a resource. And 2025 will be a fantastic time for India to take advantage of this transition and to capitalize on developing sustainable growth engines to meet both development and ecological goals.

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