Mumbai: Mahindra Intertrade Ltd, a unit of Mahindra and Mahindra Ltd, has signed an agreement with state-run MSTC Ltd to set up India’s first auto shredding facility, Mahindra said in a statement on Thursday.

The proposed facility will be equipped with fully automated end-of-life vehicle recycling equipment. This will go a long way towards the efficient recycling of scrapped automobiles.

“MSTC is always looking at innovative ways to recycle scrap and protect the environment and this facility will help to participate in the emission targets which India has promised to fulfil via the COP 21 Emission Treaty," said S.K. Tripathi, chairman and managing director, MSTC.

Auto-scrapping in India is largely an unorganized activity with vehicles long past their usable life still in use, especially in rural and semi-urban India. Older vehicles are currently dismantled in an unscientific manner that’s hazardous to the environment, the company said. The extent to which a vehicle is recycled is also very minimal, with most vehicular residue making its way into landfills.

The concept of vehicle scrappage is still new to India; it’s a lucrative industry in advanced auto markets, said Zhooben Bhiwandiwala, managing partner, Mahindra Partners. While the number of cars has increased substantially over the last two decades, there is no recycling or scrapping provision in place to deal with old and discarded vehicles.

Recycling, if done correctly, is not only environment-friendly but will also help keep older vehicles off the streets.

According to Sumit Issar, managing director, Mahindra Intertrade, a study conducted by the firm indicated that recycling not only saves energy costs but also minimizes the need for other resources as every tonne of new steel manufactured from scrap steel saves a substantial amount of iron ore, coal and limestone.

Moreover, if India focuses on scrapping old automobiles, it can recover significant amounts of steel scrap, aluminum scrap, plastic and rubber.

Given the new stricter norms related to road worthiness of automobiles, a huge number of vehicles are expected to come under the end-of-life category in India.

This initiative will not only revolutionize the way automotive scrap is generated and procured in India, but will also help reduce dependence on imports, providing steel mills with a solution for all their metal scrap related needs.

A high-level meeting on 8 December 2015 at the ministry of road transport and highways proposed to allow MSTC Ltd, a company under the ministry of steel, to set up 100 vehicle-crushing units across the country, Mint reported in January.

The meeting was attended by representatives from the ministries of finance, steel and heavy industries and MSTC Ltd.