Budget 2026 Expectations: Electric vehicle (EV) adoption is increasing rapidly in India. 2-wheeler EV sales will grow to 30% of the market by 2030; 3-wheelers already comprise above 50% of 3-wheeler sales. 4-wheelers, though comprising only up to approximately 5% of car sales today, have seen 85 to 90% of annual growth in recent years. Consequently, battery waste is also projected to exceed 128 GWh (59 GWh from EVs) by 2030. However, the amount of EV batteries being recycled is unclear, with reports suggesting that less than 1% of spent EVs are formally recycled.
One thing is certain: without a strong framework for a circular economy for batteries, there will be a huge quantity of waste to handle, along with a loss of resources. The very transition meant to decarbonise transport could generate new environmental vulnerabilities.
India’s Recycling Readiness
The country’s installed recycling capacity may be more than 50,000 tonnes annually, but utilised capacity remains 20 to 25% of capacity. While there is much policy focus on EV adoption, the Battery Waste Management Rules, 2022 (BWMR), solely guide the end-of-life management of waste batteries. The BWMR (2022) introduced the Extended Producer Responsibility (EPR) mechanism, mandating producers to ensure recycling or refurbishing.
However, informal recycling operations still dominate the industry. Refurbishing does not have clear enough guidelines, and certifications are also pending, but much of the volumes of end of life batteries may be heading towards refurbishing. The International Energy Agency’s Global EV Outlook 2025 warns that emerging economies like India risk linear transitions, meaning adoption may outpace circular readiness unless it is backed by an integrated fiscal and industrial strategy.
The Ministry of Mines recently released a landmark scheme that aims to subsidise battery material recovery from secondary sources and support recycling. The scheme’s implementation and results will be visible over the next couple of years.
Bottlenecks For Recycling
India’s recycling landscape mostly consists of pre-processors, who extract black mass (an intermediate material achieved post mechanical separation of battery materials) instead of full recycling capabilities, i.e. producers of recovered materials, for use in manufacturing. Domestic expertise in advanced recycling and refining remains nascent.
Recycling needs proper channels to direct waste and efficient collection systems. Even though the BWMR mandates collection, there are no dedicated take-back outlets, and OEMS/ small battery sellers must arrange collection individually. India’s dealership and service networks remain fragmented, and only a small percentage of used EVs re-enter formal recycling streams.
Economic factors often impact recycling. Lithium and cobalt imports are still preferred due to the unavailability of large-scale refined output of recyclers, as only a handful of recyclers have refining capabilities, and even fewer are able to do it at scale.
Due to recycling’s high processing cost (especially with hydrometallurgy), it is not always ideal for recyclers to produce refined materials, as the price of the refined materials is market dependent and margins are not guaranteed if processing costs are too high. While import duties on virgin lithium/cobalt incentivise recycling, inadequate scale hampers viability.
In China, for example, recyclers often lose money but absorb the cost for strategic resource security. In India, without subsidies or assured off-take of recovered materials, business models struggle. Hence, some forms of fiscal equalisation measures are needed in the industry.
How Budget 2026 Can Help
India can draw valuable lessons from mature markets like the EU’s Battery Regulation 2023, which mandates a digital battery passport that tracks lifecycle data and sets recovery benchmarks for critical minerals, minimum levels of recycled content in new materials. In China, there is an integrated government-industry data platform that ensures that automakers are partnered with approved recyclers before even selling their cars. Recycling firms receive performance-linked subsidies. The United States has a funding centre for R&D and incentivises domestic recyclers.
India’s Union Budget could also explore tax credits for manufacturers meeting recycling targets or using recycled materials, green infra bonds to finance recycling clusters. They could also consider output subsidies for recovered material.
Other policy and governance mechanisms could help as well, such as a Centre of Excellence for Battery Recycling, which would be a great potential government action that can localise advanced recycling tech.
Recycling Infra Must Also Accelerate
India’s electric mobility is at a crossroads. The EV adoption has accelerated, and so must recycling infrastructure. With a corrective policy, India stands to gain environmentally and economically with an aligned recycling policy.
Budget 2026 offers a decisive window. By integrating the Ministry of Mines’ recycling incentives, expanding fiscal tools, and fostering R&D collaboration, India can build a true circular battery economy, one that safeguards both sustainability and sovereignty.
(The author is the co-founder and Chief of Industrial Engineering, Metastable Materials)
