Policy Update
Saachi Saxena
Background
India’s economic rise has been accompanied by an equally dramatic expansion in vehicle ownership. Rising incomes, urbanisation, logistics growth and improved mobility have together made India the world’s third-largest automobile market. The country now adds more than 20 million vehicles annually (NITI Aayog), making automobiles one of the most important drivers of industrial activity, employment and consumption.
This success has also created a less visible challenge i.e. what happens when these vehicles reach the end of their useful life? NITI Aayog estimated that India had nearly 10 million End-of-Life Vehicles (ELVs) in 2020, and the number could approach 50 million by 2030 if current trends continue. In other words, India is not merely becoming a large automobile market; it is becoming a large vehicle retirement economy.
Unlike ordinary municipal waste, ELVs are both economic assets and environmental liabilities. A typical vehicle contains substantial quantities of steel, aluminium, copper, plastics, glass and rubber that can be recovered and reintroduced into production. It also contains hazardous materials such as engine oils, brake fluids, batteries, refrigerants and electronic components that require safe handling. When dismantling takes place through informal channels, valuable materials are extracted but hazardous substances are often discarded without adequate environmental safeguards, resulting in both resource losses and pollution.
Recognising this challenge, India has gradually built a regulatory framework for vehicle retirement. The policy progression has evolved in stages. The Vehicle Scrappage Policy, introduced in 2021, established the institutional foundation for identifying and retiring unfit vehicles through fitness testing and scrapping infrastructure. This was followed by the establishment of Automated Testing Stations (ATSs) and Registered Vehicle Scrapping Facilities (RVSFs), which provided the physical and administrative infrastructure for formal vehicle scrapping. In 2024, the Government also introduced draft End-of-Life Vehicles (Management) Rules, signalling a move towards regulating the environmental management of vehicles after retirement. The Environment Protection (End-of-Life Vehicles) Rules, 2025, therefore represent the next step in this policy evolution by extending the framework from vehicle retirement and scrapping to resource recovery and environmentally sound recycling.
The Environment Protection (End-of-Life Vehicles) Rules, 2025, notified by the Ministry of Environment, Forest and Climate Change (MoEFCC) and effective from 1 April 2025, attempted to fill that gap. For the first time, automobile manufacturers are brought under an Extended Producer Responsibility (EPR) framework that makes them responsible for ensuring environmentally sound recycling of vehicles. The shift is significant because it moves policy from a narrow focus on waste disposal towards a broader circular economy approach in which end-of-life vehicles are treated as reservoirs of secondary raw materials rather than as waste requiring disposal. Parliamentary clarifications issued during 2025 further emphasised that the Rules are intended to create a transparent, digitally monitored recycling ecosystem linked to India’s resource efficiency and climate objectives.
Functioning
The defining feature of the new framework is the application of Extended Producer Responsibility to the automobile sector. EPR has previously been used for waste streams such as plastics, batteries and electronic waste, but extending it to vehicles represents a substantial expansion of lifecycle based environmental governance. Manufacturers are no longer responsible only for producing and selling vehicles; they are now expected to ensure that prescribed quantities of material are recovered through authorised recycling channels.
India’s framework differs from many international systems because it uses a steel-based recovery mechanism rather than a vehicle-weight target. Producers must fulfil annual recovery obligations calculated as a proportion of the steel used in vehicles manufactured in earlier years. The targets are phased:
- 8% recovery for the period 2025–2030
- 13% recovery for 2030–2035
- 18% recovery from 2035 onwards
*Niti Aayog Report on Enhancing Circular Economy of End-of-Life Vehicles (ELVs) in India
The gradual trajectory reflects the reality that vehicles have long operating lives and that recycling capacity cannot be expanded overnight.
Compliance is implemented through a market-based EPR certificate system. Registered Vehicle Scrapping Facilities generate certificates corresponding to the quantity of recyclable material recovered from scientifically dismantled vehicles. Producers may purchase these certificates to meet their obligations.
The Central Pollution Control Board (CPCB) acts as the nodal authority responsible for maintaining the digital EPR portal, registering producers and recyclers, monitoring compliance and imposing environmental compensation in cases of default. RVSFs are required not only to dismantle vehicles but also to undertake depollution, remove hazardous components safely, segregate recyclable materials and maintain digital records.
A notable strength of the framework is that it builds on existing institutions rather than creating an entirely new administrative structure. The Ministry of Road Transport and Highways continues to oversee vehicle fitness testing, deregistration and scrappage procedures, while the MoEFCC framework governs environmental management after vehicles leave the road network. This reduces duplication and lowers administrative transaction costs.
Finally, the Rules also represent a conceptual change in environmental policy. Traditional waste regulation focuses on safe disposal. The ELV framework focuses on resource productivity. NITI Aayog estimates that vehicles manufactured between 2005 and 2023 could yield nearly 98 million tonnes of recoverable steel. Producing steel from recycled scrap rather than from virgin iron ore could avoid approximately 43 million tonnes of carbon dioxide equivalent emissions. These numbers matter not only for environmental reasons but also for industrial economics. India is a major steel consumer, and secondary steel recovery can reduce energy use, mining pressure and exposure to volatile global raw material prices. The ELV stream therefore has the potential to become a significant domestic source of industrial feedstock.
Performance
Although the Environment Protection (End-of-Life Vehicles) Rules, 2025 have been in force only since April 2025, early evidence suggests that implementation has begun to shift India’s vehicle-scrapping ecosystem towards greater formalisation. The Rules have established mandatory EPR obligations for producers, linked compliance to EPR certificates, and placed Registered Vehicle Scrapping Facilities (RVSFs) at the centre of environmentally sound dismantling and material recovery. This represents a move from a mainly informal, market-driven system towards a more structured framework in which producers, recyclers and government agencies have defined responsibilities.
The strongest evidence of early implementation is the expansion of the physical infrastructure required to support the framework. As of September 2025, India had 156 operational Automated Testing Stations (ATSs) across 16 States and Union Territories. There were also 117 operational RVSFs across 21 States and Union Territories, with 178 facilities approved in total.
However, infrastructure expansion has not yet translated into full utilisation of the formal recycling system. NITI Aayog estimates that India would require around 500 ATSs by 2027, implying a projected shortfall of 344 facilities compared with existing infrastructure. The report also estimates a requirement of 227 RVSFs by 2027, compared with the existing operational network. Current RVSF utilisation is reported to be below 20%, indicating that the central implementation challenge is not simply the creation of facilities but ensuring that sufficient ELVs actually enter the formal system.
This gap between regulatory capacity and actual utilisation is important for assessing the early performance of the ELV Rules. NITI Aayog reports that RVSFs processed approximately 72,000 vehicles in FY 2024–25, while the informal sector is estimated to have an annual scrapping capacity of around 2–3 lakh ELVs. The continued dominance of informal operators reflects a strong economic incentive problem. Informal dismantlers can often offer higher prices because they face lower compliance costs and generate additional revenue through the resale of spare parts.
The EPR mechanism is intended to help address precisely this problem by creating an additional revenue stream for formal recyclers. NITI Aayog estimates that EPR certificate sales could contribute up to ₹5,500 towards narrowing the price gap between RVSFs and informal operators. However, the report also notes that the current EPR targets have been deliberately kept relatively low because of limited ELV inflows, which in turn restricts the volume of certificates that RVSFs can generate. This creates an early implementation constraint: low ELV inflows weaken RVSF utilisation, while low utilisation limits the financial viability of formal facilities, making it harder for them to compete with informal operators.
The early performance of the rules should therefore be viewed as institutionally promising but operationally incomplete. The regulatory framework, EPR architecture and formal recycling infrastructure are increasingly in place, but measurable outcomes such as the share of ELVs processed through authorised facilities, material recovery rates and the reduction of informal dismantling remain limited or are still emerging. Therefore, their ultimate effectiveness will depend on whether these foundations translate into higher vehicle inflows, greater facility utilisation and sustained participation by producers and consumers.
Impact
The true significance of the Environment Protection (End-of-Life Vehicles) Rules, 2025 lies in the fact that they extend beyond environmental regulation. Properly implemented, they have the potential to reshape India’s industrial ecosystem by converting discarded vehicles into productive economic assets. In doing so, it strengthens the country’s transition from a linear model of production and consumption to a circular economy.
One of the most important changes is the creation of a formal market for vehicle recycling. Under the Extended Producer Responsibility framework, compliance is linked to tradable EPR certificates generated by authorised recyclers, converting recycling from a largely informal activity into a recognised economic service. This also supports the gradual formalisation of India’s vehicle recycling industry, which has historically been dominated by informal dismantling, often favoring the extraction of high-value components while hazardous materials are inadequately managed.
The benefits extend well beyond the automobile industry. A predictable supply of secondary raw materials can strengthen manufacturing, reduce dependence on imported raw materials and improve resilience against fluctuations in international markets. As India’s manufacturing ambitions expand under initiatives such as Make in India, improving domestic material recovery becomes not only an environmental objective but also an industrial strategy.
Taken together, these shifts represent a broader change in policy thinking. Waste management is increasingly being integrated with industrial policy, climate policy and resource efficiency.
The environmental benefits arise alongside these economic gains. Authorised facilities are required to undertake proper depollution and safely handle hazardous components, helping reduce the environmental costs associated with unsafe dismantling. At the same time, recovering materials from ELVs allows their economic value to be retained within the production system for longer.
The impact of the ELV rules therefore extends beyond the disposal of retired vehicles. By connecting producer responsibility with formal recycling and material recovery, the framework has the potential to support both environmental protection and resource efficiency. However, the extent to which these potential benefits translate into measurable outcomes will depend on the continued implementation of the rules and the ability to move vehicles from informal channels into authorised recycling facilities.
Another important development has been the rapid expansion of India’s digital Extended Producer Responsibility ecosystem.
Government data presented in Parliament as of 5 March 2026 recorded 4,574 registered recyclers operating across various EPR waste streams, 417.57 lakh metric tonnes of waste recycled and 341.93 lakh metric tonnes of EPR certificates generated.
These figures represent the broader EPR ecosystem & indicate the scale of the digital compliance infrastructure within which the ELV framework is being implemented.
Emerging Issues
Despite substantial institutional progress, several implementation challenges remain.
The most immediate is the continued dominance of the informal recycling sector. Informal dismantlers frequently offer vehicle owners higher immediate returns because they operate with lower compliance costs and selectively recover commercially valuable components. As a result, many ELVs continue to bypass authorized Registered Vehicle Scrapping Facilities, limiting both environmental performance and EPR certificate generation.
This is closely linked to limited consumer awareness and low inflows of vehicles into formal recycling channels. Many vehicle owners remain unfamiliar with authorised scrapping facilities, Certificates of Deposit and the financial incentives associated with formal recycling. As a result, owners may continue to rely on informal dismantlers, particularly when these channels offer higher immediate returns. Low participation in formal channels, in turn, means that authorised facilities may receive insufficient vehicle volumes to operate at commercially viable capacity.
Infrastructure constraints further reinforce this problem. Although the Government has promoted Automated Testing Stations and Registered Vehicle Scrapping Facilities, access remains limited in several regions. NITI Aayog observes that some authorised facilities currently operate below capacity because insufficient vehicles enter formal recycling channels. Thus, the challenge is not only the availability of infrastructure but also ensuring adequate vehicle inflows to make that infrastructure economically viable.
Institutional coordination presents another challenge. Successful implementation requires continuous interaction between transport authorities, pollution control boards, manufacturers, recyclers, digital platforms and state governments. Delays or inconsistencies across these institutions can weaken traceability, increase compliance costs and make the formal recycling process more difficult for vehicle owners and recyclers to navigate.
These challenges therefore reinforce one another: limited consumer awareness and the attractiveness of informal dismantling reduce vehicle inflows into authorised facilities; low inflows can constrain facility utilisation and commercial viability; and uneven infrastructure and institutional coordination can further discourage participation in the formal system. Addressing these issues requires a coordinated approach rather than treating each challenge in isolation.
Way Forward
Expanding the network of Automated Testing Stations and Registered Vehicle Scrapping Facilities remains essential for improving geographical accessibility and increasing formal recycling capacity. Greater interoperability between the VAHAN database, the V-Scrap platform and the CPCB’s EPR portal could enable end-to-end traceability from vehicle registration and deregistration to dismantling and material recovery. Linking these systems would help track vehicles through each stage of their lifecycle, reduce gaps in documentation, improve monitoring of scrapping and recycling outcomes, and strengthen compliance with EPR obligations.
Consumer participation also deserves greater policy attention. Simplified scrapping procedures, wider awareness campaigns and more effective utilisation of Certificates of Deposit can improve the flow of vehicles into authorised facilities. At the same time, gradually formalising informal dismantlers through training, certification and technical support would improve environmental compliance while preserving livelihoods.
The EPR framework itself should remain adaptive. Periodic review of recovery targets, transparent functioning of certificate markets and continuous monitoring of compliance will be essential as the automobile fleet evolves. In the longer term, manufacturers should also be encouraged to increase recycled material content and adopt design practices that make future dismantling easier and more economical.
Finally, the Environment Protection (End-of-Life Vehicles) Rules, 2025 represent a broader shift in India’s economic thinking. As the country pursues higher growth alongside climate commitments, resource efficiency is becoming a source of competitiveness rather than a constraint. The ELV framework reflects this change by recognising that economic growth in the twenty-first century will depend not only on producing more, but also on using existing resources more judiciously contributing to India’s transition towards a more resilient and resource efficient economy.
References
NITI Aayog Report: Enhancing Circular Economy of End-of-Life Vehicles (ELVs) in India
Press Release on Circular Economy Framework and Extended Producer Responsibility – 23 MAR 2026
Press Release Page | Press Information Bureau
Lok Sabha Question No. 2306, table “Status of implementation of EPR frameworks
PARLIAMENT QUESTION: Compliance of End-of-Life Vehicles Rules, 2025, Press release
Press Release Page | Press Information Bureau
About the Contributor
Saachi Saxena is an undergraduate student pursuing B.A. (Hons.) Economics at Gargi College, University of Delhi. Her research interests include climate economics, public policy, sustainable development, healthcare economics, and development policy. She has actively contributed to policy research and social impact initiatives and is passionate about evidence-based policymaking for inclusive and resilient development.
Acknowledgements
The author is grateful to IMPRI – Impact and Policy Research Institute for providing the opportunity to prepare this policy update. The author sincerely acknowledges the guidance, valuable feedback, and constructive suggestions received from Pallavi Lad and Dolly Kaushik during the review process, which significantly strengthened the quality and analytical depth of this article.
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