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Things to know before starting a Scrap Business in India

Until a few years ago, the scrap business in India was considered a low-class occupation. However, times have changed.

Rapid urbanization in India has led to a surge in demand for scrap metal and other recyclable materials.

The Indian government is also supportive of the scrap business, introducing various policies and schemes to promote its growth.

If you are looking to start a low-cost, sustainable business, the scrap business is definitely worth considering. In this article, we will share some important information you need to know before starting a scrap business in India.

Ideal Locations for Starting a Scrap Business

Scrap business in India

Residential areas, construction zones, and industrial hubs are ideal locations to start this business.

Residential areas primarily generate paper and plastic scrap. Construction zones generate metal scrap and construction debris, while industrial hubs generate metal, plastic, and e-waste.

Ensure you have enough space to store collected and sorted scrap. Your location should also have good road connections for transporting and collecting scrap.

Ideally, locate your business near recycling plants or scrap buyers. Otherwise, you may spend most of your profits on transportation costs.

Type of Scrap to Collect

There are different types of scrap that can be recycled. Before starting your business, it’s important to decide which types of scrap you’ll collect. Here are some popular options:

Metals: Iron, steel, copper, brass, aluminium, lead, etc. This is the most common type of scrap business in India. Scrap metal can be recycled into new products, such as steel, aluminium, and copper.

Plastic: PET bottles, HDPE and LDPE plastics, etc. Plastic waste is a major problem in India. Plastic recycling businesses collect and recycle plastic waste into new products, such as bottles, bags, and fibres.

Paper: Cardboard, newspaper, office paper, etc. Paper is a major source of scrap in India. Paper recycling businesses collect and recycle paper waste into new paper products.

E-waste: Old computers, mobile phones, TVs, appliances, etc. E-waste is the fastest-growing waste stream in the world, and India is no exception. E-waste contains a number of valuable materials, such as gold, silver, and copper, which can be recycled.

Analyse what types of scrap materials are readily available in your area and what types of scrap materials are in high demand in your area, then decide your scrap niche.

The Licenses and Permits required

The Licenses and Permits required to start a this business may vary from state to state and municipality to another. So it is better to consult a local chartered accountant to know the exact documents.

Generally, to start a scrap business, you will require:

  • GST registration
  • Shop and Establishment certificate
  • Business Registration
  • Trade License

In special cases, you may also require:

  • Pollution Control Board (PCB) Certificate
  • E-waste Handling Authorization (if you are collecting E-waste)

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Investment Required to Start a Scrap Business

investment for scrap business

You can start a small-scale scrap business with an investment of 3 to 4 lakh rupees. Your major investment needs will be as follows:

  • Purchase of basic tools and equipment (eg. weighing scales, handcarts, power tools, safety gear, magnets, metal files, etc.)
  • Permits and licenses
  • Vehicle for scrap collection and transportation
  • Warehouse or storage space security deposit
  • Ongoing monthly expenses will include warehouse rent, utility bills, labour salaries, and maintenance work.

Starting a medium to large-scale scrap business with a scrap sorting machine will require more investment. Scrap storage requires more space, so your investment needs will also vary depending on your location.

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Profit Margin in the Scrap Business

The typical profit margin for a scrap business in India is generally between 30% and 60%. Different types of scrap have different market values. For example, metals like copper and brass typically have higher margins than plastics or paper.

Government Support for Scrap Business

The Indian government recognizes the importance of small-scale scrap businesses for their contribution to the economy and environment. Here are some ways they offer support

  • MUDRA Loan Scheme: This government-backed scheme offers various loan products for MSMEs, including small scrap businesses.
  • Prime Minister’s Employment Generation Programme (PMEGP): This scheme provides subsidized loans to individuals and groups for establishing new small businesses, including scrap processing units. 
  • Credit Guarantee Fund Scheme for MSMEs: This scheme provides credit guarantees to MSMEs from Commercial Banks, Financial Institutions, and SIDBI. This can help scrap businesses access loans at easier terms.
  • National Skill Development Corporation (NSDC): NSDC offers various skill development programs relevant to the scrap industry, such as waste management, metal processing, and sorting. 

We hope this article has provided enough information about starting a scrap business in India. If you find this article helpful, kindly share it with your friends. If you have any additional questions, you can mention them in the comments section

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