Modernising Vehicle Scrappage: Addressing regional bottlenecks

This article is authored by Kartick V Nagpal | President, Rosmerta Technologies.

The vehicle scrappage policy is a watershed in India's journey to a circular economy. The phasing out of old and unfit vehicles, improving roads with newer and safer vehicles, and minimising pollutants caused by old engines is providing an enormous benefit of domestic supply of secondary raw materials, including steel, aluminium, and plastics, as well as improved road safety. However, the transition from a well-intentioned policy to a ground-level industrial reality is proving to be a bumpy road. The core challenge has shifted from policy formulation to system delivery, and that is where our main focus must now lie.

The national intent is evident, but the speed of the implementation process is being set by one harsh truth: the gaps in infrastructure and the regional disparities. How we will overcome these bottlenecks will determine our success in modernising the ecosystem.

The infrastructure chasm

The policy's architecture rests on two key components that are Automated Testing Stations (ATS) to scientifically identify unfit vehicles, and Registered Vehicle Scrapping Facilities (RVSFs) to dispose of them in an environmentally sound way. Although the progress is clear, as the number of RVSFs rises to over 129 facilities by the beginning of 2026, the magnitude of the task remains intense.

According to the NITI Aayog report, India will require about 441 ATS in 2027 compared to 156 today, and 227 RVSFs against the 178 approved. With over 88% of end-of-life vehicles (ELVs) continue to enter the informal sector, formal facilities are performing at sub-optimal capacity, and cannot compete with the business efficiency, and in many cases, lack of regulatory compliance, of informal dismantlers.

The regional inequality issues

The extreme imbalance of regions is probably the most important challenge. By the end of 2025, only 16 states will have ATS, of which Gujarat alone has a third. Other states and particularly eastern and north-eastern India, have no or very little formal scrapping or testing infrastructure. This forms an unequal circularity map where progressive states such as Gujarat, Maharashtra, and Haryana are on the rise, whereas the rest are left behind. A vehicle cannot be scientifically termed as unfit without a local ATS, nor can it be truly scrapped without a local RVSF. The coverage of the policy, thus, remains confined.

The global standards can be observed to close the gap between the regional disparity in the Indian scrappage landscape, with the global standards providing concrete blueprints of fair scaling. The reuse model in Japan, for instance, incorporates the original equipment manufacturers (OEMs) into the end-of-life management by the Automobile Recycling Law, and the reuse of the ELV is 99%. Such incentives can be adapted in India by requiring OEM-supported networks of collection in eastern and north-eastern states with lower coverage, and directing informal flows into formal reuse programs.

The lost cue between the testing and scrapping

Even in the locations where ATS are available, they are not yet effective triggers of scrappage. According to recent data, the vast majority of vehicles tested receive a 'fit' certificate, and conversion to ELV status remains negligible. This suggests ATS is currently acting more as a compliance certification channel rather than a retirement mechanism. The system does not have the essential push factor that is critical to divert unfit vehicles in the test lane to the scrapping bay. As a result, RVSFs run out of feedstock, their businesses are compromised, and the formal circularity chain is disrupted at the very first stage.

The way ahead: A prescription for modernisation

First of all, supercharging of policy alignment and incentives should happen. The new SASCI 2025-26 scheme, with graded compensation and bonuses to states in the event of scrapping government and private vehicles, and for establishing ATS, is a powerful step. States need to aggressively tap these funds and imitate successful models such as the privately-owned ATS model in Gujarat, which has proved not only in speed of scale but also in commercial viability. Moreover, there is a need to standardise best-practice Certificate of Deposit (CoD) concessions across all states, as suggested, in order to develop a uniform pan-India consumer inducement.

Second, the great equalisers are technology and digital integration. Any contemporary scrappage ecology needs to be an information-based one. Since Aadhaar-owned ownership transfer is proposed to be implemented in the VAHAN portal, it can remove the presence of ghost owners and be done only in the case of the end-of-life vehicles that will be successfully de-registered through CoD submission. Enhanced platforms like V-Scrap can democratise information for scrap value discovery, ensuring transparency and fair pricing for the last vehicle owner.

Third, we should design the economics of recycling. Formal players require alternative sources of revenue in order to compete with the informal sector. This implies the formalisation of the market in the spare parts, which at the moment is one of the biggest sources of informal earnings. At the same time, the Extended Producer Responsibility (EPR) system of ELVs needs to be reinforced and have higher levels of recovery targets to form an actual demand pull toward materials supplied by formal recyclers, which would make them economically viable.

Lastly, the informal sector should not be alienated but integrated. The informal network that is present is huge and wise in conducting business. This can be transitioned into the formal world with a staged process, which provides one-time compliance waivers, availability of finance on the Udyam Assist Platform, and technical training, making these small operators a potential partner or collection agent of RVSFs.

In reality, the vehicle scrappage ecosystem in India is at a critical crossroads. The intent of the policy is strong, and the foundational infrastructure is being established. The success, however, will not be dictated or defined by overarching edicts but rather by our strengths in dealing with the challenges on the ground level. We can create a circular automotive economy by aligning state-level action with central policy, using technology to help achieve transparency and engineering an ecosystem where formal recycling is both environmentally sound and economically rewarding. This is a planned process of not just scrapping old vehicles, but systematically recovering and retain their value for a more sustainable and mobile India.

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