How to Start Scrap Business in India – Detailed Insights!

Posted on Monday, December 23rd, 2024 | By IndusInd Bank

Scrap business means buying, processing, and selling scrap materials like plastic, paper, metals and other such recyclable elements. With the global move towards sustainability, there is an increase in the demand for recycled materials and this presents scrap merchants and scrap metal dealers with increasing opportunities.

India presents to those in the scrap business an opportunity to make handsome profits, provided you are planning your business well and executing your business as planned. Recycled scrap materials have a high demand in the Indian market and your aim as a scrap dealer would be to purchase cheap, process them as per the extant guidelines, and sell them for a profit.

How to Start a Scrap Business in India?

You need to plan very carefully to start a scrap business in India and keep in mind the following:

From metals to plastics, and even e-waste, the scrap sector offers a lot of scope for aspiring entrepreneurs. Here’s a step-by-step guide to help you get started.

1.    Identify the Type of Scrap to Deal In

The first decision is selecting the type of scrap you want to handle. Each type of scrap comes with its own market demands and profit potential.

• Metal Scrap: Includes aluminum, iron, steel, and copper.
• Plastic Scrap: Sourced from households, industries, and retail outlets.
• E-Waste: Includes old computers, mobile phones, and electronic equipment.
• Paper and Cardboard Scrap: Includes newspapers, magazines, and packaging materials.

Tip: Conduct a market analysis in your area to identify the most abundant and in-demand scrap materials.

2.    Assess Processing Requirements

Some types of scrap require additional processing to increase their value or prepare them for recycling or resale. For example, metal scrap may need sorting, cleaning, or cutting into smaller pieces.

For this purpose, you may need to set up a small unit with equipment like crushers, shredders, or separators. Consider taking a small business loan to cover the costs of setting up a processing unit if your business has been running for at least 2 years. IndusInd Bank offers business loans with competitive interest rates and quick disbursal to help you get started.

3.    Apply for and Procure Permits and License

You need to liaise with the authorities and arrange to procure all essential permits and licenses for the scrap business. The requirements may vary for different parts of India. However, the following are normally required:

• Trade License
• PAN
• GST Registration
• Scrap Dealers License
• MSTC License for Scrap
• Clearance from the Pollution Control Board (PCB), etc.

4.    Arrange Collection and Transportation

Collection and transportation are crucial for running a successful scrap business.

• Collection Points: Set up collection centres near residential or industrial areas. Here, you can source scrap directly from households, factories, or retailers.
• Transportation: Invest in trucks, loaders, or smaller vehicles to move materials from collection points to your processing or storage facility.
• Partnerships: Build relationships with local waste collectors, scrap dealers, and recycling plants to streamline your supply chain.

5.    Arrange for Funding

The scrap business is capital intensive. Purchasing scrap materials requires a lot of funds and the processing requires specialised equipment as well as staff. All of these carry substantial costs. If your business is more than 2 years old, you should apply for a Quick Business Loan or raise capital by taking on partners or investors. In case your gap in the funds required is less, you must choose the former. The Government also has schemes offering financial assistance to Micro, Small and Medium Enterprises (MSME).

Click Here to Apply for an IndusInd Bank Business Loan

Also read: Difference Between Secured and Unsecured Loans

6.    Build a Customer Base

Identify buyers for your scrap materials to ensure steady cash flow. Your buyers can be:

• Recycling plants, who recycle it into raw materials.
• Manufacturing units, who may purchase scrap directly for reuse.
• Exporters who tend to purchase some types of scrap, such as metals, to cater to high demand in international markets.

7.    Market Your Business

Promote your scrap business to attract suppliers and buyers. You can do this through local ads, social media, and eco-friendly campaigns to appeal to eco-conscious customers.

Ideas for Scrap Business in India –

The scrap business in India is mainly based on the recycling of the following materials:

• Scrap Metal
• Paper
• Plastic
• E-waste

Also read: Where can I Get an Unsecured Small Business Loan?

Conclusion –

The scrap business in India is potentially extremely profitable. India’s share at USD 11 billion in 2022 was only 2.2 per cent of the global figure. India will consume 60 million tons of metal scrap by the end of this decade. This, aided by readily available Online Business Loan products will fuel the growth story of the industry. Please note, the business needs to be a minimum of two years old before applying for a Quick Business Loan with us.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.