Re-Oiling The Wheels: Navigating India’s Used Oil Landscape Under the Extended Producer Responsibility

India's Path to Sustainable Used Oil Management

India, as the world's third-largest lubricant market, faces a significant challenge in the sustainable management of used oil generated from its expanding automotive and industrial sectors. With lubricant demand expected to rise from 2 8 million tons to nearly 4 million tons by 2030, the country annually generates approximately 1,325 kilotons (kT) of used oil. Alarmingly, only about 15% of this vast quantity is collected for re-refining, while the remaining portion is either burned or illegally dumped, causing severe environmental harm. Addressing this issue is crucial, and adopting innovative reverse logistics models could enhance used oil management while benefiting other waste management sectors.

The Importance of Proper Used Oil Management

Proper management of used oil is essential to prevent pollution of air, soil, and water. Improper disposal, such as burning, releases harmful substances like sulfur dioxide and nitrogen dioxide, which contribute to respiratory diseases. Economically, low re-refining rates translate to missed opportunities in reducing reliance on imported virgin base oil. Re-refining used oil is significantly more energy-efficient than producing base oils from crude, requiring only one-third of the energy. Recycling 500 kT of used oil annually could prevent approximately 1 million tons of CO2 emissions and save over Rs.5,000 crores in crude oil imports. A circular economy approach is, therefore, vital to closing the loop in the lubricant supply chain, minimizing waste, and maximizing resource efficiency.

Current Challenges in Used Oil Collection and Recycling

Despite having over 400 re-refining plants with a combined capacity exceeding 1,000 kT, India's re-refining industry operates at only 30-40% capacity. This underutilization stems from inconsistent raw material supply, inadequate collection systems, low awareness of proper disposal methods, and the predominance of the unorganized sector in waste oil management. The collection process is often opaque, with cash transactions dominating the sector, leading to significant volumes of used oil being misdirected to unauthorized applications such as fuel adulteration and illegal burning.

Innovative Reverse Logistics Models

To address these challenges, several innovative reverse logistics models can be considered:

Aggregator Networks: Small-scale aggregators collect used oil from sources like garages, service stations, and factories, transporting it to regional hubs for quality checks and segregation.
Retailer-Driven Buyback Programs: Lubricant retailers offer discounts or loyalty points to incentivize consumers to return used oil responsibly.
Digital Waste Collection Platforms: Technology-driven platforms connect waste oil generators with authorized collectors and recyclers, ensuring real-time tracking, transparency, and optimized collection routes.
Urban Cooperative Systems: Organized waste collector groups can efficiently manage urban waste oil collection, improving working conditions and integrating collectors into formal systems.
OEM Workshop Collaborations: Partnering with OEM workshops can ensure a consistent supply of high-quality, uncontaminated used oil. However, challenges remain, such as improper segregation, lack of proper storage, absence of transaction records, and unauthorized sales.

Challenges in Building a Robust Used Oil Collection Infrastructure

Several hurdles exist in strengthening the used oil collection system:

The collection network remains fragmented, with a strong presence of informal collectors.
Many service centers and industrial users lack awareness of responsible disposal methods.
Illegal disposal practices and use as fuel substitutes persist due to economic incentives.
Regulatory compliance enforcement remains weak, allowing used oil to be diverted to non-sustainable applications.

Advances in Re-Refining Technologies

Various re-refining technologies differ in efficiency and environmental impact:

Acid Clay Refining: Requires low capital investment but produces low-quality base oil and hazardous sludge.
Vacuum Distillation with Clay Polishing: Yields better-quality base oil but still generates waste.
Hydrotreating (Advanced Refining): Produces high-quality base oil meeting industry standards but involves high capital investment.
Solvent Extraction & Hydrofinishing: Offers superior-quality base oil with minimal environmental impact but requires specialized infrastructure and higher operational costs.

While some large-scale refiners are adopting advanced technologies, smaller players often rely on older methods due to cost constraints. The pricing mechanism for used oil is influenced by factors such as bargaining power among large-scale generators, black market activities, oil quality, and demand for re-refined base oils.

Extended Producer Responsibility (EPR) Framework

A major step toward sustainable used oil management in India is the implementation of the Extended Producer Responsibility (EPR) framework, effective from April 1, 2024. This policy mandates that producers of base oil or lubrication oil are responsible for the collection, treatment, and environmentally sound disposal or recycling of used oil. The Central Pollution Control Board (CPCB) and the Ministry of Environment, Forest and Climate Change (MoEFCC) have been instrumental in this evolution. The Used Oil EPR Portal for Producers has been live since June 24, 2024.

Key objectives of the EPR framework include:

Re-refining up to 50% of used oil into Re-refined Base Oil (RRBO), reducing import dependence on Virgin Base Oil (VBO) and conserving foreign exchange.
Formalizing the informal collection sector and enhancing collection infrastructure.
Encouraging investments in advanced re-refining technologies.
Creating employment opportunities in the MSME sector.

Under the EPR framework, different entities have specific responsibilities:

Producers: Must register on the portal, fulfill EPR obligations by purchasing certificates, file annual returns, provide consumer awareness, and ensure compliance.
Recyclers: Must register, maintain compliance with facility and process regulations, prevent environmental damage, and file quarterly and annual returns.
Collection Agents: Must register, collect used oil from generators, supply only to registered entities, and file required reports.
Used Oil Importers: Must register, meet EPR targets, and file annual returns.
Bulk Generators: Must establish collection points and ensure used oil is handed over only to registered recyclers, producers, or collection agents.

It is important to distinguish between Used Oil, which can be reprocessed if it meets specific criteria, and Waste Oil, which includes spills and sludge and can only be used as fuel for energy recovery under strict specifications.

Strengthening India's Circular Economy for Used Oil

To transition towards a circular economy for used oil, India must enhance collection infrastructure, enforce regulatory compliance, promote advanced re-refining technologies through incentives, conduct public awareness campaigns, and implement a transparent pricing mechanism. By embracing innovative reverse logistics models and effectively implementing the EPR framework, the country can minimize environmental harm, reduce import dependence, unlock economic value, and set a global benchmark for sustainable practices. Waste management companies and industry stakeholders have a critical role to play in driving this transformation.