Overview of Vehicle Scrapping Business in India

There is a shortage of registered vehicle scrapping facilities in India. The vehicle scrapping market in the country is presently regulated by the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021 and the subsequent amendment in 2022. The Vehicle Scrapping Policy was announced in the Union Budget for 2021-22 and aimed to reduce the count of old and defective vehicles, bring down vehicular air pollutants, and improve road and vehicular safety. Most of the changes in the 2021 rules are crucial to the vehicle scrapping business and the security of the VAHAN database. While the 2021 Policy tries to address the ill effects of old vehicles on the environment, it also aims to make the option of scrapping their old vehicle an easy and hassle-free experience for the general public. The policy does not treat an old vehicle as obsolete or scrap just because of the age of the vehicle. Still, it considers factors such as engine performance, vehicular emissions, quality of brakes and other safety measures. The vehicle scrapping business, therefore, also has to abide by the guidelines for sound management and scrapping of End-of-life vehicles (ELVs) and Automotive Industry Standard (AIS) 129. A 2020 study by CPCB showed that 25 per cent of waste material from scrapping facilities has one or other form of hazardous material like heavy metals. Waste oils, coolants, ozone-depleting substances and other chemicals are generated at the time of scrapping of a vehicle. The government is not only incentivising such businesses by providing them with assistance, but it has also made the registration process for RVSF (registered vehicle scrapping facility) simpler. The Ministry of Transport and Highways (MoRTH) has done away with the requirement of necessary cyber security certifications for a Registered Vehicle Scrapping Facility. Moreover, RVSF will not be required to verify the record of the vehicles with local police before scrapping. The deregistration process has been streamlined and made more IT-driven.

Functioning of a Registered Vehicle Scrapping Business

The end-of-life car is stripped/ taken down part-by-part and segregated at the authorised scrapping facility. Various automotive fluids (engine oil, brake fluid) are also drained. After this, the tyres, wheels, and battery are removed. Costly components such as the engine, alternator, transmission, and mechanical or electronic subassemblies that might be serviceable are kept aside so that they can be sold later. When done correctly, vehicle scrapping can surely increase the profit margins of the scrapping centres. Any further processing or scrapping is done only when the car has been stripped of most of the usable parts. The pipes and heater core that are intact with the vehicle's body can also be salvaged. However, the plastic and glass bits are removed, and the body paint is often sanded/ scraped off. The remaining body/ shell gets crushed, then shredded, and recycled to form a new metal.

Scope of Vehicle Scrapping Business in India

As per the new Vehicle Scraping Policy, automated testing stations and scrapping facilities (RVSFs/ AVSFs) will be set up in phases in the country. Currently, 75 such stations are proposed under Phase 1, and this count will gradually increase to 450–500 stations or facilities across the country. The government has welcomed private entities to invest in setting up such facilities in collaboration with various state governments. The Central government is planning to set up 50–70 scrapping facilities for vehicles in the next few years.

As per the Vehicle Scrapping Policy,2021, commercial vehicles aged more than15 years and passenger vehicles aged more than 20 years will have to be scrapped if they do not pass the fitness and emission tests. The objective is to phase out old cars, reduce urban pollution, and stimulate automotive sales. Additionally, the scrappage policy is presented as a part of a larger stimulus package by the government, requested by original equipment manufacturers (OEMs) to stir demand. These developments will require vehicle scrapping at a massive scale and, therefore, an ample business opportunity for registered vehicle scrapping businesses.

Licences and Authorisations needed to set up Vehicle Scrapping Business

RVSF Registration/ Vehicle Scrapping Licence

 A specific procedure for registering RVSF is defined under Motor Vehicles (Amendment) Rules, 2022. To do so, the applicant has to submit a duly filled application under Form-1to the Registration Authority of the concerned State Government or Union Territory Government, depending on where the RVSF will be established. A non-refundable processing fee also needs to be submitted. The government will set up a single-window clearance portal for RVSF. This portal will also be used for the renewal of registration also. The validity of registration for an RVSF shall be 10 years (renewable for 10 years at a time). The key documents and certificates required for Vehicle Scrapping Facility Authorisation are -

• Duly filled form I
• Incorporation Certificate or Shop Act Registration or Udyam Aadhaar
• GST registration
• Valid PAN
• Consent to Establish Proof
• Proof of technical requirements mandatory for collection and dismantling centres as per CPCB guidelines
• Proof of machinery required for depollution
• Consent to Operate (CTO) from the SPCB/ PCC (or an undertaking to obtain CTO within six months)
• Undertaking to obtain quality Certification of ISO 14001 or ISO 45001, or ISO 9001 within 12 months
• Proof of occupation, like an agreement or proof of lease proof (for three years)
• Approved layout plan

Consent NOC

A No Objection Certificate, also called Pollution No Objection Certificate (NOC), is provided by the State Pollution Control Board/ Pollution Control Committee (SPCB/PCC) of the respective state to establishments such as the vehicle scrapping business before it starts operation. This NOC is provided in two stages of the setup of the RVSF,i.e.Consent to Establish (CTE) before the construction of the facility starts and the other Consent to Operate (CTO), issued after a site inspection of the RVSF. The documents required at this stage are

Documents Required for Consent NOC

• Online Application Form (through OCMMS)
• Signed Undertaking
• Site Plan along with a roadmap
• Detailed Project Report and total project investment.
• Layout plan
• Details of the manufacturing process, list of machinery, capital, water balance and source and required quantity.
• Land ownership proof  like lease/ rent agreement
• Industry Registration Certificate

• Duly filled Application form of the concerned SPCB
• Balanced Sheet by CA
• Copy of CTE
• Proof of pollution control devices with their location, capacity and exit points of the discharge etc.)
• Copy of land-related documents
• Consent fee (as applicable)
• Laboratory analysis report of the trade effluent and emissions.
• Copy of environmental Clearance if needed
• Any other Document specified in the form

Hazardous Waste Management Authorisation

The RVSF must be authorised to handle hazardous waste from scrapped vehicles as per HWM Rules or avail the facilities of a TSDF operator Documents needed in case the facility owner needs this authorisation are

• Duly filled out form I
• GST Registration of the facility
• Copy of the Emergency Response Plan (ERP) addressing the procedures for dealing with emergencies (like spillage, accidental release or fire)
• Copy of the latest Consent Order granted by the SPCB
• Proof of installed Pollution Control Equipment
• Approved Layout plan for the TSDF.
• Copy of prior Environmental Clearance along with compliance report.

Additional Licences required by a Vehicle Scrapping Business

• Business Registration Certificate
• GST Registration
• MSME Registration
• Fire NOC

How can Enterclimate assist you?

One-stop assistance for your business Our team of licencing experts provides all-inclusive aid in setting up your Registered Vehicle Scrapping facility. We have a vast network of experts all over the country who can make your scrapping facility setup a hassle-free experience with the authorities.

Cost-effective solutions We provide customised packages that are designed to suit the needs of our clients, keeping in account the requirements of the business. Therefore, we ensure that our clients are provided with only expert legal assistance. We also keep them updated with the changes in government policies that are relevant to their business.

Unmatched customer experience Our customer support ensures that every query of our clients is resolved with precise and prompt assistance. We provide only exact and accurate related advice for our clients from our team of lawyers, CAs and CS experts in their respective fields.