India’s ambitious vehicle scrappage policy has fallen far short of expectations, with less than 3 percent of targeted end-of-life vehicles being processed through authorised channels over a three-year period.
A detailed assessment by NITI Aayog reveals that despite the government's efforts to phase out aging and high-emission vehicles, millions of over-aged vehicles continue operating on Indian roads, raising concerns about pollution, road safety and environmental compliance.
The findings highlight major structural, financial and regulatory challenges that have slowed the implementation of one of India's key green mobility initiatives.
Only 3.5 Lakh Vehicles Scrapped Through Authorised Facilities
According to the report, only around 3.5 lakh vehicles were processed through Registered Vehicle Scrapping Facilities (RVSFs) between August 2022 and July 2025.
This represents less than 3 percent of the estimated end-of-life vehicle population targeted under the policy.
Meanwhile, nearly 12 million over-aged vehicles are believed to remain operational across the country.
Many others continue to be dismantled through informal scrap networks that often operate without environmental safeguards or proper waste management systems.
Regulatory Disconnect Slows the Entire Ecosystem
One of the major concerns highlighted by NITI Aayog is the lack of coordination between two key government systems.
Ministry of Road Transport and Highways
The Ministry of Road Transport and Highways manages the Vahan database, which handles vehicle registration, deregistration and enforcement activities related to aging vehicles.
Ministry of Environment
The Ministry of Environment, Forest and Climate Change oversees the Extended Producer Responsibility portal under the End-of-Life Vehicles Management Rules.
The report states that these two systems currently operate independently and do not effectively communicate with one another.
As a result, authorities often struggle to track a vehicle's journey from deregistration to final recycling.
This gap affects transparency and creates difficulties in issuing and verifying digital recycling certificates.
Financial Incentives Have Failed to Attract Owners
The report also points to weaknesses in the economic design of the scrappage policy.
Under the Extended Producer Responsibility framework, vehicle manufacturers are required to meet recycled steel targets through authorised recycling channels.
EPR Steel Recycling Targets
- FY 2026–2030: Minimum 8% recycled steel per vehicle
- FY 2031–2035: Gradual increase phase
- FY 2036 onwards: Target increases up to 18%
Manufacturers are expected to purchase digital EPR certificates generated by authorised scrapping facilities.
However, the market for these certificates remains underdeveloped and lacks a transparent pricing mechanism.
Because of this, vehicle owners often receive lower returns from authorised facilities than they can obtain from local informal scrap dealers.
State-Level Benefits Remain Inconsistent
The policy originally promised incentives such as:
- Registration fee waivers
- Motor vehicle tax concessions
- Benefits on replacement vehicle purchases
However, NITI Aayog notes that implementation varies significantly across states.
Many vehicle owners report limited awareness of available benefits or difficulty accessing them.
Without meaningful financial incentives, owners have little motivation to choose authorised recycling channels.
Urban-Centric Infrastructure Limits Access
The report further highlights a significant geographical imbalance in scrappage infrastructure.
Most authorised testing centres and high-capacity vehicle shredding facilities are concentrated around major metropolitan and manufacturing hubs.
This leaves large portions of:
- Tier-2 cities
- Tier-3 towns
- Rural districts
without convenient access to authorised scrapping centres.
As a result, informal recyclers continue to dominate the market.
Informal Scrap Sector Still Controls Much of the Market
NITI Aayog recommends integrating informal scrap operators into the formal recycling ecosystem.
The report suggests:
- State-supported licensing programs
- Training initiatives
- Standardised collection partnerships
- Environmental compliance frameworks
Such measures could help expand capacity while improving recycling standards nationwide.
NITI Aayog Calls for Immediate Reforms
To improve policy outcomes, the report recommends several urgent measures:
Database Integration
Connecting the Vahan platform with the EPR portal to create end-to-end tracking of scrapped vehicles.
Transparent Certificate Pricing
Establishing a clear floor price for EPR certificates to strengthen market participation.
Stronger Consumer Incentives
Making financial benefits more consistent and attractive across all states.
Public Awareness Campaigns
Educating vehicle owners about environmental benefits and available incentives.
Without these reforms, the report warns that the scrappage policy may continue to miss both environmental and economic objectives.
What This Means for India's Green Economy
Vehicle recycling is increasingly becoming an important part of sustainable economic development.
Countries worldwide are investing heavily in circular economy models that reduce waste, recover valuable materials and lower carbon emissions.
For businesses looking at international expansion, sustainability policies are becoming a major factor in investment decisions. Companies exploring business setup in dubai and other global business hubs increasingly evaluate environmental regulations, recycling frameworks and green infrastructure before entering new markets.
Shunyatax Global Insight
At Shunyatax Global, we believe policy success depends on implementation, transparency and economic incentives. The NITI Aayog report highlights that ambitious environmental goals require strong infrastructure, integrated systems and active public participation to deliver meaningful results.
For more updates on policy, business, taxation, sustainability and economic reforms, visit Shunyatax.in and stay connected with Shunyatax Global.