India’s used oil recycling sector stands at a critical juncture, as a newly released report highlights deep-rooted structural inefficiencies and calls for comprehensive regulatory reforms. Despite its potential to reduce crude oil imports, lower energy consumption, and cut greenhouse gas emissions, the sector remains highly fragmented and predominantly informal. The report, jointly prepared by FICCI, the Resource Efficiency and Circular Economy Industry Coalition (RECEIC), and Deloitte, underscores the need for a phased transition towards a more sustainable and regulated ecosystem.
The study, unveiled during the ‘Global Symposium on Resource Efficiency & Circular Economy’ in New Delhi, identifies used oil as a valuable resource capable of being re-refined into high-quality lubricants. However, the current management practices are not only inefficient but also pose significant environmental risks. The absence of an organised value chain has led to rampant under-reporting, cash transactions, and the illegal diversion of used oil into unauthorised channels, thereby undermining the economic and environmental potential of the sector. Recognising these challenges, the Indian government has implemented an Extended Producer Responsibility (EPR) framework that mandates progressive recycling targets. Starting with a modest requirement of 5% in the financial year 2025, the EPR obligations will rise steadily to 50% by 2031. The demand for EPR compliance certificates is projected to increase from 0.08-0.09 million metric tonnes (MMT) in the initial years to approximately 1.00 MMT by 2031. While these targets signal a decisive push towards formalisation, industry experts argue that without strengthening governance mechanisms and technological interventions, compliance could remain elusive.
The lubricants market in India, currently estimated at 4.2 MMT, is expected to reach 5.0-6.0 MMT by 2031, with finished lubricants comprising over half of the total consumption. The automotive sector remains the largest consumer, accounting for 55-60% of the demand, while industrial applications make up the remaining share. With the rise in lubricant consumption, the volume of used oil generated will inevitably increase, making efficient recycling mechanisms an urgent necessity. To address the sector’s inefficiencies, the report proposes a three-pronged strategy spanning short-term, medium-term, and long-term interventions. In the immediate future, up to 2026, the creation of a National Used Oil Management Association is recommended to act as a central governing authority. Digital registration of bulk generators, along with the deployment of a robust track-and-trace system, is also proposed to ensure transparency and curb malpractice. Additionally, audits of existing recyclers and the establishment of a structured collection network could significantly streamline operations, paving the way for formalisation.
Between 2027 and 2028, the report suggests integrating the unorganised sector into the formal economy through digital platforms, allowing for self-registration and better oversight. Simultaneously, financial incentives and industry engagement initiatives are recommended to encourage the adoption of Re-Refined Base Oil (RRBO) in lubricant production. Investments in training programmes and awareness campaigns are also deemed essential to fostering compliance and capacity building.
In the long term, post-2029, a systemic overhaul involving infrastructure investments and technological advancements will be critical. Establishing advanced re-refining demonstration facilities, incentivising high-grade RRBO production, and enhancing regulatory oversight will be pivotal in ensuring the sector’s long-term sustainability. The report underscores that aligning domestic recycling standards with global best practices can significantly contribute to India’s energy security and climate objectives, reducing reliance on virgin oil imports while curbing environmental hazards.
With an overarching goal of fostering a circular economy in used oil management, the study provides a strategic roadmap to transform the sector into a more transparent, accountable, and technologically driven ecosystem. Through a blend of policy interventions, digitalisation, and private sector participation, India has the opportunity to create a world-class used oil recycling framework that not only supports industrial growth but also mitigates ecological risks. The report’s findings serve as a clarion call for urgent reforms, emphasising that a well-structured and efficiently regulated used oil ecosystem could play a crucial role in India’s broader sustainability and self-reliance ambitions.
