This article was written by Kartik V Nagpal, President, Rosemerta Technologies.The vehicle scrappage policy is a watershed in India’s circular economy journey. The phasing out of old and obsolete vehicles, improving roads with new and safer vehicles, and reducing pollution from old engines are providing a huge benefit in improving road safety, along with domestic supply of secondary raw materials including steel, aluminum and plastics. However, the transition from a well-intentioned policy to an industrial reality on the ground is proving to be a difficult road. The main challenge has shifted from policy formulation to system delivery, and that is where our primary focus should now be.The national intent is clear, but the pace of implementation is being dictated by a harsh reality: infrastructure gaps and regional disparities. How we overcome these obstacles will determine our success in modernizing ecosystems.
Infrastructure gap
The policy framework rests on two key components which are Automated Testing Stations (ATS) to identify scientifically unfit vehicles, and Registered Vehicle Scrapping Facilities (RVSFs) to dispose of them in an environmentally sound manner. While progress is evident, as the number of RVSFs will reach more than 129 facilities by the beginning of 2026, the magnitude of the task remains. According to Niti Aayog According to the report, India will need around 441 ATS in 2027 compared to 156 today, and 227 RVSFs compared to the sanctioned 178. With more than 88% of end-of-life vehicles (ELVs) still entering the informal sector, formal facilities are operating at maximum capacity, and cannot compete with the business efficiency, and in many cases, lack of regulatory compliance, of informal disposers.
Issues of regional inequality
The extreme asymmetry of the terrain is perhaps the most important challenge. By the end of 2025, only 16 states will have ATS, of which Gujarat alone has a third. Other states, particularly eastern and northeastern India, have little or no formal scraping or testing infrastructure. It maps an uneven spectrum where progressive states such as Gujarat, Maharashtra, and Haryana are on the rise, while others lag behind. A vehicle cannot be declared scientifically unfit without a local ATS, nor can it be truly scrapped without a local RVSF. Policy coverage, thus, remains limited.Global standards can be observed to bridge the gap between regional disparities in the Indian scrappage landscape, global standards provide concrete blueprints of fair scale. The reuse model in Japan, for example, involves original equipment manufacturers (OEMs) in end-of-life management through the automobile recycling law, and ELV reuse is 99%. Such incentives can be adapted by requiring OEM-supported networks of collection with less coverage in eastern and northeastern states in India, and by directing informal flows into formal reuse programs.
The missing clue between testing and scraping
Even where ATSs are available, they are not yet effective drivers of scrappage. According to recent data, the majority of vehicles tested obtain a ‘fit’ certificate, and the change in ELV status is negligible. This suggests that the ATS is currently operating more as a compliance certification channel than as a retirement mechanism. The system does not have the necessary push factor that is important for diverting inoperative vehicles in the test lane to the scrapping bay. As a result, RVSFs run out of feedstock, their business is compromised, and the formal circularity chain is broken at an early stage.
The Way Forward: A Prescription for Modernity
First, there should be policy alignment and supercharging of incentives. The new SASCI 2025-26 scheme, which provides graded compensation and bonuses to states for scrapping government and private vehicles, and setting up ATS, is a powerful step. States need to use these funds aggressively and emulate successful models like the privately owned ATS model in Gujarat, which has proven not only speed of scale but also commercial viability. Additionally, there is a need to standardize the best practice Certificate of Deposit (CoD) incentives across all states, as proposed, to encourage uniform pan-India customers.Second, the great equation is technology and digital integration. Any contemporary scrappage ecology must be information-based. As Aadhaar ownership transfer of ownership is proposed to be implemented in VAHAN portal, this may eliminate the existence of ghost owners and can be done only in case of vehicles which will be deregistered by successfully submitting CoD. Enhanced platforms like V-Scrap can democratize information for scrap value discovery, ensuring transparency and fair pricing for the end vehicle owner. Third, we must design the economics of recycling. Formal players need alternative sources of income to compete with the informal sector. This means the formalization of the market in spare parts, which is currently one of the largest sources of informal income. At the same time, the Extended Producer Responsibility (EPR) system of ELVs needs to be strengthened and higher levels of recovery targets are needed to draw real demand towards material supplied by official recyclers, which would make them economically viable. Finally, the informal sector should not be isolated but integrated. The informal network that exists is huge and wise in doing business. It can be transitioned to the formal world with a step-by-step process, which provides one-time compliance waivers, availability of finance on the Udyam Assist platform, and technical training, making these small operators potential partners or collection agents of RVSFs. In fact, the vehicle scrap ecosystem in India is at a critical juncture. Policy intent is strong, and the infrastructure is being put in place. However, success will not be determined or defined by broad mandates but by our strengths in dealing with challenges on the ground. 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 organic recycling is environmentally and economically beneficial. It is a planned process not only to phase out old vehicles, but to systematically restore and maintain their value for a more durable and mobile India.Disclaimer: The views and opinions expressed in this article are solely those of the original author and do not represent those of The Times Group or its employees.
