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Steel · Decarbonisation · Policy AnalysisIndia’s Steel Scrap Landscape: The Vehicle Scrappage Policy, the EAF Expansion Opportunity, and Why Securing Scrap Is Now a Strategic Imperative
Scrap is the lowest-cost, fastest-deployable decarbonisation lever available to India’s steel sector. EAF steelmaking using scrap emits approximately 0.4 to 0.6 tCO₂ per tonne of crude steel — a fraction of the 2.0 to 2.5 tCO₂ per tonne from the dominant BF-BOF route. India’s government has set a target of 50% scrap use in steelmaking by 2047, up from 23% today. The gap between ambition and reality is structural and widening: domestic scrap generation is approximately 32 million tonnes per year, while demand has already reached 41 million tonnes. By 2030, the supply-demand gap could reach 20 to 30 million tonnes annually — in a world where major exporting regions are simultaneously restricting scrap exports to protect their own decarbonisation. This article maps India’s scrap policy landscape, the Vehicle Scrappage Policy’s underperformance, the EAF investment wave under way, and what CCTS and CBAM mean for scrap procurement strategy.
India produced approximately 149 to 150 million tonnes of crude steel in 2024. Scrap accounts for only about 23% of steel feedstock — significantly below the global average of 32%, and far below Turkey at 85%, the US at 70%, and the EU at 59%. This gap reflects India’s historically young steel stock (which generates limited end-of-life scrap), the continued dominance of ore-based primary routes, and structural weaknesses in organised scrap collection and processing.
EAF steelmaking using scrap reduces carbon emissions by approximately 1.5 tCO₂e per tonne of scrap used compared to the primary iron ore route, and cuts energy consumption by approximately 75%. In EU conditions, EAF steel emits approximately 0.33 tCO₂ per tonne of crude steel. India’s EAF route, while less clean due to the higher grid emission factor, still offers a substantial carbon intensity advantage over BF-BOF and positions plants well below the CCTS 5-star green steel threshold of 1.6 tCO₂e per tonne of finished steel.
Domestic scrap generation grew from 19 MMT in FY2022 to 32 MMT in FY2025. Demand grew from 24 MMT to 41 MMT over the same period. The structural supply-demand gap — currently approximately 9 MMT — is projected to expand to 20 to 30 MMT annually by 2030 as India’s crude steel capacity targets double to 300 MMT and EAF’s share of new capacity rises. India imported 11.7 MMT of scrap in 2023 and approximately 9.4 MMT in 2024, making it the world’s second-largest scrap importer.
The Vehicle Scrappage Policy (launched 2021) is significantly underperforming. From August 2022 to July 2025, only approximately 350,500 vehicles were scrapped at Registered Vehicle Scrapping Facilities — under 3% of the estimated 12 million eligible vehicles. Only 62 RVSFs were operational as of late 2024, against a 2026 target of 500,000 vehicles per year. The government is responding with stronger enforcement (mandatory ATS fitness tests now operational), enhanced incentives (MoRTH proposed a 50% tax rebate for BS-II or earlier vehicles in January 2025), and Extended Producer Responsibility under the ELV Management Rules 2024.
Major integrated producers are actively expanding EAF capacity: Tata Steel commissioned a Rs 3,200 crore scrap-based EAF plant in Ludhiana (Punjab); JSW Steel is building a 1.5 MTPA H₂-ready DRI + EAF plant at Vijayanagar; SAIL is developing a 1.5 MTPA EAF plant by 2029. The CCTS green steel taxonomy’s 5-star threshold (below 1.6 tCO₂e/t finished steel) is achievable for scrap-based EAF mills — making scrap procurement a direct path to earning Carbon Credit Certificates against CCTS targets.
The carbon case for scrap — why it is the fastest decarbonisation lever
The carbon arithmetic of scrap-based steelmaking is unambiguous. The BF-BOF route begins with iron ore, coke, and limestone in a blast furnace — generating CO₂ at the reduction stage, at the coke oven, and in the converter. The emission intensity of the typical Indian integrated BF-BOF plant is 2.0 to 2.5 tCO₂e per tonne of crude steel produced. The EAF route begins with scrap, feeds it through an electric arc furnace, and requires no iron ore reduction chemistry. Its emission intensity, in India’s current grid context (0.710 tCO₂/MWh), is approximately 0.4 to 0.6 tCO₂e per tonne of crude steel — almost entirely driven by electricity consumption.
Every tonne of scrap used in steelmaking avoids approximately 1.4 to 1.5 tCO₂e compared to producing the same steel from virgin iron ore. The World Steel Association and the Material Recycling Association of India both cite this figure. EAF production also cuts energy consumption by approximately 75% compared to the BF-BOF route — with direct implications for energy cost, not just carbon compliance.
| Steelmaking route | Primary feedstock | Typical GEI (tCO₂e/t crude steel) | CCTS green taxonomy | CBAM competitiveness |
|---|---|---|---|---|
| BF-BOF (coal-based) | Iron ore + coking coal | 2.0–2.5 | Below 3-star (<2.2) | High CBAM exposure; certificate cost significant |
| DRI-EAF (NG-based) | Natural gas DRI + scrap | 1.4–1.8 | 3–4 star range (1.6–2.2) | Moderate CBAM exposure; manageable with efficiency |
| Scrap-EAF (grid electricity) | Scrap + grid RE | 0.4–0.6 | 5-star eligible (<1.6 tCO₂e/t finished steel) | Low CBAM exposure; competitive in EU market |
| H₂-DRI-EAF (green H₂) | Green hydrogen DRI + scrap | <0.5 | 5-star eligible; near-zero pathway | Minimal CBAM exposure; future EU premium |
The CCTS green steel taxonomy’s 5-star category (below 1.6 tCO₂e per tonne of finished steel, notified as Gazette 763(E) on December 12, 2024) is achievable for well-run scrap-EAF mills today, without breakthrough technology. A plant running on a mix of scrap and grid electricity with renewable procurement and good energy efficiency practices can meet the 5-star threshold. This makes scrap procurement a direct path to CCTS Carbon Credit Certificate generation for steel plants — and a direct path to premium CBAM positioning for exporters.
The supply-demand gap — structural and widening
India’s scrap supply-demand arithmetic is straightforward and concerning. Domestic scrap generation depends on the accumulation and end-of-life of previously produced steel goods — cars, appliances, construction materials, industrial equipment. India’s steel industry is relatively young compared to the US, EU, and Japan: much of India’s steel stock was produced in the 2000s and 2010s and has not yet reached end-of-life. This structural lag means domestic scrap generation will remain constrained for years, even as capacity for scrap consumption expands rapidly.
India imported 11.7 MMT of ferrous scrap in 2023 — a 40% year-on-year increase — from primary sources in the US, UK, and EU. In 2024, import volumes fell to approximately 9.4 MMT as cheaper DRI (sponge iron) — partly from Chinese supply — competed with imported scrap for furnace charge. In January to April 2025, imports recovered to 3.48 MMT, up 7.9% year on year, but continued to face pressure from domestically produced DRI when its price fell sharply.
The DRI substitution dynamic is a structural feature of India’s secondary steelmaking market that creates persistent import volatility. EAF and induction furnace mills can substitute DRI for scrap in their furnace charge mix when DRI is cheaper — reducing scrap demand and import volumes temporarily. The scrap premium over DRI averaged approximately $63/t in the first half of 2025 and $69/t over the previous five years. This premium needs to remain manageable for EAF mills’ economics to favour scrap over DRI. When the premium expands — as when Chinese sponge iron supply compressed DRI prices in mid-2025 — scrap import demand softens.
The longer-term threat to India’s import-based scrap supply is more serious than price cycles. Over 60 countries have either banned or restricted ferrous scrap exports to prioritise domestic consumption for their own decarbonisation. The EU — historically one of India’s largest scrap suppliers — is tightening export controls. The UK, Singapore, and other key sources are considering similar restrictions. Global ferrous scrap trade is projected to shrink by approximately 15% by 2030. India, with a structural domestic supply gap, faces a shrinking pool of export-willing suppliers precisely when its import requirements are growing.
India’s scrap policy landscape — what exists and what is underperforming
The NSP 2017 established the first formal policy targets for scrap usage and capacity expansion. It recognised scrap as central to India’s resource-efficient steelmaking vision. The 300 MMT capacity target by 2030 and 50% scrap share by 2047 (later recalibrated) are the reference points against which all downstream policy is measured. Progress on capacity is on track; progress on scrap share is lagging significantly.
The Metal Recycling Policy provided a framework for formalising India’s largely informal scrap collection and processing sector. It identified the need for organised shredding capacity, quality standards for processed scrap, radiation monitoring at ports, and traceability mechanisms. Implementation has been partial — many collection points remain informal, quality consistency is variable, and low-impurity shredded scrap suitable for high-grade EAF production remains in short supply domestically.
The Vehicle Scrappage Policy is India’s most direct scrap supply-side intervention. It established mandatory fitness testing for commercial vehicles older than 15 years and personal vehicles older than 20 years at Automated Testing Stations. Vehicles failing fitness tests are declared End-of-Life Vehicles (ELVs) and must be scrapped at Registered Vehicle Scrapping Facilities (RVSFs). Incentives for voluntary scrapping include 25% motor vehicle tax rebate (personal vehicles) and 15% (commercial vehicles), plus OEM discounts of 5 to 6% on new vehicle purchases against a Certificate of Deposit.
The End-of-Life Vehicles (Management) Rules 2024, notified January 30, 2024, establish Extended Producer Responsibility (EPR) requiring vehicle producers and importers to ensure scrapping of ELVs at RVSFs. This shifts the burden of formalising ELV flows onto manufacturers rather than relying solely on vehicle owner incentives — a more structural approach to ensuring that end-of-life vehicles enter the organised scrap chain rather than being broken up by informal dismantlers.
In January 2025, MoRTH proposed increasing the one-time tax rebate to 50% for buyers purchasing a new vehicle after scrapping a BS-II or earlier vehicle. This is a significant enhancement from the 25% current rate, specifically targeting the oldest and most polluting vehicles. In May 2025, Tata Motors opened its eighth RVSF in Kolkata, expanding the network’s geographic coverage into eastern India.
The Vehicle Scrappage Policy’s headline numbers tell a disappointing story. From August 2022 to July 2025 — three full years — only approximately 350,500 vehicles were scrapped at RVSFs. India has an estimated 12 million vehicles eligible for scrappage, including 4.5 million medium and heavy commercial vehicles and 7.5 million light vehicles. At the actual pace, 3% of eligible vehicles have been processed in three years. The government’s target of 500,000 vehicles per year by 2026 is roughly 14 times the actual monthly pace. Two structural reasons explain the gap: first, the financial incentives (4 to 6% scrap value payout, 25% tax rebate) are insufficient for most vehicle owners to offset the cost of acquiring a new replacement vehicle in a country with high asset prices and thin margins. Second, the RVSF network — only 62 facilities operational as of late 2024 — is dramatically undersized for the task. Until the economics improve significantly and the infrastructure density reaches a critical threshold, voluntary scrapping will remain limited.
The EAF investment wave — who is building what
India’s major steel producers are responding to the combined pressures of CBAM, the CCTS green steel taxonomy, and growing premium market demand for low-carbon steel with a wave of EAF investment. EAF currently accounts for approximately 25 to 30% of India’s steelmaking capacity, with utilisation rates of about 74% — lower than the 84% seen at BF-BOF mills, partly because of the more variable scrap and DRI input pricing.
Tata Steel’s Rs 3,200 crore scrap-based EAF plant in Ludhiana, Punjab, is the most visible recent addition — India’s first modern, large-scale scrap-dedicated EAF plant at an integrated producer. The plant marks a structural shift in Tata’s strategy toward the secondary route and signals confidence in northern India’s scrap supply chain. JSW Steel’s 1.5 MTPA hydrogen-ready DRI + EAF plant at Vijayanagar in Karnataka combines H₂-DRI capability with EAF melting, positioning the plant for a transition from natural gas DRI to green hydrogen DRI as hydrogen costs fall. SAIL’s plan for a 1.5 MTPA EAF plant by 2029 brings India’s largest public sector steel company into the EAF expansion, which is particularly significant given SAIL’s historically BF-BOF orientation.
Among new greenfield projects, out of 258 MMT of total capacity in design-to-implementation stages, approximately 33.54 MMT (13%) is planned as EAF. This share is below the policy aspiration for EAF dominance in new capacity but represents meaningful absolute volume. ArcelorMittal Nippon Steel India aims to bring 70% of its products to green criteria compliance by FY2026–27, with a current CO₂ emission rate of 2.17 tCO₂/t targeting reduction to 1.8 tCO₂/t by 2030 — achievable only through scrap increase, renewable electricity procurement, and efficiency gains, not through BF-BOF process alone.
Scrap, CCTS, and CBAM — the strategic alignment
For CCTS-obligated steel plants, scrap procurement strategy is now simultaneously a production input decision, a compliance cost management decision, and a CBAM positioning decision. The three frameworks align on the same directional answer: more scrap, faster.
Under the CCTS, steel plants are assigned GEI targets in tCO₂e per tonne of crude steel. BF-BOF plants with GEI of 2.0 to 2.5 tCO₂/t will face growing shortfalls as targets tighten to 4 to 6% per year in FY2026–27. Increasing the scrap charge in a BOF furnace — even without converting to EAF — reduces the plant’s GEI by reducing the proportion of iron ore-derived iron in the charge mix. Every additional tonne of scrap charged into a BOF at 10% of total charge reduces the GEI by approximately 0.15 to 0.20 tCO₂/t — a meaningful compliance contribution achievable with existing furnace infrastructure.
Under CBAM, embedded Scope 1 and Scope 2 emissions from steel exported to the EU are the basis for certificate obligation. An integrated producer whose BF-BOF steel carries 2.2 tCO₂/t embedded emissions faces substantial CBAM certificate costs at €80/tCO₂e — approximately Rs 14,400 per tonne of steel. An EAF plant using scrap with embedded emissions of 0.5 tCO₂/t faces approximately Rs 3,600 per tonne. The difference — Rs 10,800 per tonne of steel — is the competitive position that scrap-based EAF provides relative to integrated BF-BOF in EU export markets. For a plant producing 1 MMT of steel for export, this Rs 10,800/t advantage translates to Rs 10,800 crore ($1.3 billion) in avoided CBAM cost annually. This figure alone explains why the largest Indian producers are aggressively pursuing EAF expansion.
The corollary challenge is supply security. As CBAM creates a premium for low-carbon steel in EU export markets, scrap — the primary input for EAF — becomes a strategic resource rather than a traded commodity. Producers that secure long-term scrap supply agreements, invest in domestic collection infrastructure, and support the formalisation of India’s scrap recycling sector are building a durable competitive advantage. Those that depend on spot market imports from increasingly restrictive suppliers are building a structural vulnerability.
Frequently Asked Questions
Why is India’s scrap share so much lower than the US and EU despite significant EAF capacity?
India’s comparatively low scrap share reflects its steel stock age profile. The US, EU, Turkey, and Japan built their steel industries in the mid-to-late 20th century, meaning large volumes of steel are now reaching end-of-life and entering the scrap stream. India built much of its steel infrastructure in the 2000s and 2010s — most of it is still in active use and will not be available as scrap for another decade or two. Additionally, India’s organised scrap collection system is immature: the informal sector dominates, quality consistency is poor, and the RVSF network is undersized. The combination of steel stock age and infrastructure immaturity — not EAF capacity — is the binding constraint on domestic scrap availability.
Can a BF-BOF plant reduce its CCTS GEI by increasing scrap use without converting to EAF?
Yes. BOF furnaces use scrap as a coolant in the steelmaking process, and the share of scrap in the charge mix can be increased — typically from 10 to 15% (current Indian average) to 25 to 30% — without capital-intensive conversion. Each additional percentage point of scrap in the BOF charge reduces the GEI by reducing the proportion of CO₂-intensive hot metal from the blast furnace. This is the fastest and cheapest GEI reduction lever available to integrated producers in the near term. It requires securing additional scrap supply but no major process investment beyond raw material logistics.
What is the DRI-scrap substitution dynamic and how does it affect scrap market pricing?
EAF and induction furnace mills can partially substitute directly reduced iron (DRI / sponge iron) for scrap in their furnace charge. When DRI prices fall — as happened in mid-2025 when Chinese sponge iron supply compressed Indian DRI prices — mills shift their charge mix toward DRI, reducing scrap demand and softening import prices temporarily. The scrap-DRI price premium averaged $63/t in H1 2025 and $69/t over the previous five years. When this premium is below approximately $40/t, DRI substitution becomes commercially attractive and scrap demand softens. When DRI supply tightens or prices rise, mills revert to scrap. This substitution dynamic creates price cycles that mask the underlying structural growth in scrap demand.
Does the Vehicle Scrappage Policy generate enough scrap to make a meaningful difference to the steel sector?
At current pace — approximately 400,000 vehicles scrapped by December 2025 — no. A typical end-of-life vehicle yields approximately 0.4 to 0.8 tonnes of steel scrap. At 400,000 vehicles, total scrap from VSP is roughly 160,000 to 320,000 tonnes — less than 1% of India’s annual scrap demand. At the government’s aspirational target of 500,000 vehicles per year and an estimated 12 million eligible vehicles in the fleet, full implementation could eventually add 4 to 8 MMT per year to the scrap supply. That would be genuinely significant — but it requires a 14-fold acceleration from current monthly pace, which is not occurring without stronger enforcement and better incentives.