Vehicle Scrapping Business in India - Legal Gyan

Dheeraj Budhori
August 14, 2022
Vehicle Scrapping Business in India

Vehicle Scrapping Business

Vehicle scrapping business is a sustainable business that helps in reducing the number of vehicles cluttering the streets and roads. It is a business that helps in keeping our environment clean and free from pollutants. Scrapping of vehicles also provides raw materials for manufacturing new vehicle parts, commodities and other products.
Tons of people are choosing to run their own scrap vehicle business due to factors such as low investment capital, low maintenance costs and less taxes. A vehicle scrapper can even turn scrap metal into cash by selling it to some processing plants or recycling firms. It is so much easier to work with scrap metals than with other metals because they are easy to find. You will find them in parking lots, abandoned homes, junkyards and many other places. You can also find them under bridges and overpasses where they are discarded by people. In fact, you do not even need to go out looking for scrap metals; they come right to you!
Working as a vehicle scrapper is one of the few businesses that require little paperwork or certification from the federal government. There are no licenses required for running a vehicle scrapper business in most states. However, there are some states that may require you to obtain either an identification number or license in order to start your vehicle.

Scrap Industry in India

India is the largest scrap market in the world. Scrap is the waste that would otherwise become a burden on the environment. The scrap industries are concerned about the protection of ecology and the environment. Hence, the Indian scrap industry has taken a number of steps to ensure the safe and sound management of waste. The main objective of this article is to introduce participants to the various aspects of vehicle scrapping, various laws related to the scrap industry, etc.
In this article, we are going to talk about how to start an authorized vehicle recycling facility or vehicle scrapping business. Same as a scrap yard, you can also call it a vehicle dismantling facility. The authorized vehicle scrapping/recycling facility is responsible for ensuring that all scrap metal material is properly removed from the site and The process of scrapping includes cutting the vehicles into pieces, removing all components that can be reused and then selling them for recycling purposes. If you are not able to remove the scrap metal yourself, you must hire a licensed and bonded vehicle scrapper. The scrap metal dealer may charge a fee for removing the scrap metal.

Authorised vehicle scrapping facility

It is not easy to start a new business , especially in the face of stiff competition. However, it is possible to beat the competition and establish yourself as a market leader. But remember that you cannot afford to take any shortcuts to success; you have to work hard and follow a systematic approach.
A car-scrap yard, an automobile demolishing plant or authorised vehicle scrapping facility is a good business to start in India, especially if you are from Hyderabad, Haryana, Gurugram, Kolkata, Delhi or Mumbai, Maharashtra. The process of scrapping a vehicle is regulated by central governments in India under the provisions of the Central Motor Vehicles Rules 1989 (CMVR). This regulation specifies that only authorised vehicle dismantlers are permitted to receive scrap vehicles and carry out the shredding and recycling process. In order to maximise resource recovery, it is necessary for authorised vehicle dismantlers to shred parts from scrapped vehicles in an environmentally sound and responsible manner. The CMVR provides specific details regarding the manner in which this must be done .

Here's how to set up an scrap vehicle business:

If you're a contractor who dismantles vehicles, you should register your business as an authorised vehicle-dismantling facility or if you are a seller then the first thing to do is make sure the company you are dealing with has a valid dismantlers licence. There are strict guidelines from the government that you will have to follow if you want to start a vehicle scrapping business. The Ministry of Environment & Forests and Climate Change, has issued a notification under the Air (Prevention and Control) Act 1981 which regulates facilities for dismantling of motor vehicles for processing for scrap. As per this notification all new authorized vehicle scrapping facilities (AVSF) will have to obtain authorization from Pollution Control Board/ State Pollution Control Board as per Air (Prevention and Control) Act 1981. These rules are set by the Central Government of India and followed by every state government as well.
Applicable ACT /Rules Provisions of the following Act/ Rules are applicable: -
  1. The Motor Vehicle Act, 1988.
  2. The Central Motor Vehicles Rules, 1989.
  3. Various State and UT Motor Vehicles Rules, 1993
  4. Indian Penal Code, 1860

Here are eligibility criteria and conditions for grant of Authorization for Authorised vehicle scrapping facility:

  • The place where the plant will be set up should be industrial. The land should be fit for the purpose of such a plant and should not harm the environment around it. It should be easily accessible and near a railway line or road.
  • A proper layout plan should be created and approved by the concerned authority before anything else is done. The plan should mention the location of every important thing like machinery, office, warehouse etc., so that it would be easy for everyone to find them when needed.
  • Registration under the Company firm, trust or society law.
  • Then the applicant will have to get his/her business name registered with pollution control board
  • Environmental Clearances
  • Occupational Health & Safety Clearances(if applicable)
  • Fire NOCs (if applicable)
  • The entity Should have applied for or be in possession of an approval for Consent to Establish from the competent authority of the State/UT in which the AVSF is intended to be located.
  • Shall undertake to meet the minimum technical requirement for collection and dismantling centres specified as per Guidelines issued by the Central Pollution Control Board.
  • Should have competent manpower and appropriate equipment to carry out the depollution and dismantling activities in a safe and environmentally responsible iii. manners.
  • Shall undertake to obtain the required quality certifications of I50 9001(quality management system)/ISO 14001(environmental certification)/ISO (occupational health and safety) within 12 months of commencement of operations. 4500.
  • Should possess, or provide an undertaking to obtain, a No Objection Certificate of the State Pollution Control Board, within a period of six months from commencement of operations
  • Should Undertake to abide by the Provisions of Labour Laws, Minimum Wages Act, Employees Provident fund Act, Workmen Compensation Act and all other Acts and Rules as are applicable.
  • Availability of an useable treatment area of a minimum of 4000 sqm (for treatment of Category L Motor Vehicles including 3W) and a minimum of 8000 sqm (for treatment of all type of Motor vehicles including Category L, M, N and other vehicles ) of land in the Orange category industrial zone of the State/UT by way of, ownership or agreement to sell or agreement for long term lease of a minimum period for which the licence is sought.
  • Must be in possession of security certificates for IT systems to have secure access to the vehicle database.
  • Should provide approved plant layout and the building plan. Should have an environment management plan for the facility.

Authorisation procedure to start authorised vehicle scrapping facility

  • Application, in the prescribed FORM-1 or as may be prescribed by the designated licencing authority of the State/UT Government should be addressed to the 'Licensing Authority' of the concerned State/UT where the AVSF is intended to be located along with: -
    • A processing fee of Rs. 1 lakh for this purpose or as prescribed by the State/UT Government.
    • An Earnest Money Deposit by way of a bank guarantee of Rupees Ten Lakh in favour of the designated Licensing Authority or designated officer as notified by the State/UT government as a non-interest-bearing Security deposit for a period co- terminus with the validity of the initial authorisation period plus 90 days.
  • All applications for grant of licence are to be disposed of by the Licensing Authority within a period of 30 days from the date of application. Successful applicants would be issued an authorisation in FORM -1A or as prescribed by the State/UT Government for this purpose.
  • Earnest Money/Bank Guarantee would be refunded for unsuccessful applicants. The processing fee will not be refunded.
  • On grant of licence the Authorised Scrapper is to duly register the facility with the designated authority in the State/UT, the CPCB and the State Pollution Control Board.
  • States/UTs may notify additional eligibility requirements for the facility to ensure sustainability, adequate capacity and environment protection.

Validity and renewal of Authorisation

The authorization of authorised vehicle scrapping facility will be valid for an initial period of 10 years in the first instance, which will be renewable for another 10 years at a time.

How to get vehicle scrapping certificate in India

Vehicle Scrapping Certificate is a proof issued by the RTO, Authorised Scrapper that a vehicle has been scrapped. Vehicle owners can then sell their used car to a scrapyard without paying any tax because it has already been declared as scrap. This process is not complicated. But if you're doing this for the first time, it's best to know what you're doing.

Here's how to get your vehicle scrapping certificate in India:

The registered owner or authorised representative must handover the vehicle, along with an Application in two originals in accordance with FORM -2, to the Authorised Scrapper or designated collection centre for deposit/treatment.
The Authorised Scrapper shall accept the FORM-2 and the applicable original documents from the owner or the authorized representative as follows:
  • Original Certificate of Registration.
  • Original Fitness Certificate following which the vehicle has been declared unfit for use, if applicable
  • Authorisation from the registered owner.
  • In case of Inheritance, the death certificate of the registered owner accompanied with any proof of succession.
  • Certificate or order confirming the sale of the vehicle in a public auction in his favour duly signed by the person authorised to conduct the auction.

You need to submit the following documents for vehicle scrapping certificate:

  1. The original copy of the vehicle registration certificate (RC) and driving license
  2. The original copy of the insurance policy(if applicable)
  3. The original copy of the bill of sale from the previous owner (if you bought the car from someone else). If it's a company, then you need an authorized dealer letter
  4. Original RC book, if available
  5. A no objection letter from your bank (if the car is financed). If the car is sold on loan, then you need an authorization letter from the finance company with whom you have loaned money
  6. A photocopy of your address proof such as Passport, Voter Card, Aadhar Card, Driving Licence, Photo Identity card issued by the State/Central Government
  7. Address Proof of the owner such as Electricity Bill, Water Bill, LandLine Telephone Bill, piped cooking gas bill etc. Digital photograph of the owner or authorized representative physically handing over
  8. A FORM-2 that the owner or the owner's authorised representative must complete and give a copy to an authorised scrap dealer, who will then provide a 'Certificate of Deposit' as proof of ownership transfer.

To get a Scrap Vehicle certificate, the following requirements need to be fulfilled:

  1. The owner has to submit an application along with the required documents to the concerned authorised scrapper, Now whatever vehicle you want to scrap, you have to get its photo clicked. Send it along with an application form to your local RTO (Not sure please concern with the authority)
  2. After completing the necessary treatment, will issue a Digital "Certificate of Vehicle Scrapping', including a digital photograph of the cut out of the Chassis in FORM-3. to update the National Register, VAHAN Database and inform the competent authority of the State/UT for updating of records.

How do I set up a scrap yard

Setting up a scrap yard is a great way to supplement your income or even create an entirely new source of income. It involves buying scrap metal and reselling it at a profit. All you need is some capital to start with and the ability to search for scrap metal on your own. You can start a scrap yard with little money, but if you want to be successful, you'll need to learn. The first step in setting up a scrap yard is selecting an industrial location.

The start-up process of starting your own scrap yard. The steps are as follows:

  1. Determine the size of your operation.
  2. Location and permits
  3. Equipment
  4. Vehicles
  5. Employees
  6. Marketing
There are a few important things to keep in mind. These include:
  1. Having a variety of materials to place in your yard.
  2. Having the right tools for the job.
  3. Keeping accurate records of what you buy and sell.
  4. Being able to get rid of the scrap that you don't want or need.
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