As Tamil Nadu pursues its ambition of becoming a trillion-dollar economy by 2030, the state has entered a new phase in its industrial strategy with the rollout of the Circular Economy Investment Policy 2026, aimed at encouraging industries to extract value from waste, attract green investments and future-proof export sectors against emerging sustainability norms.Officials describe the policy as the beginning of a long-term transition rather than an immediate transformation. While circular practices already exist across industries, the govt now aims to formally signal its intent and provide incentives for businesses investing in recycling, reuse and resource-efficient manufacturing.“Because this is a new area, a lot of activity is happening under the radar,” said V Arun Roy, secretary, industries department, Tamil Nadu govt. “But the idea is to encourage the sector. A lot of wealth can be generated from waste, particularly given the profile of our industrialisation—automotive, electronics, textiles and so on.”The policy builds on Tamil Nadu’s broader push for sustainable industrial development by encouraging industries to embed recycling, remanufacturing and waste recovery into production processes. Unlike traditional industrial policies, it does not set numerical targets.“We neither have a baseline nor a target,” Roy said. “The idea is simply to convey that the govt cares about this sector. If companies want help, they can come to us.”At the heart of the policy is a package of incentives designed to lower entry barriers for recycling and circular manufacturing. Roy said eligibility norms have been liberalised, with recycling projects requiring a minimum investment of about ₹20 crore within two years to qualify for subsidies.The incentives apply to manufacturing units that use recycled materials or waste streams—such as discarded products, industrial waste or wastewater—as key production inputs. The policy also extends support to technology-driven waste-management platforms that connect waste generators, recyclers and brands through digital systems.These platforms can improve material traceability, facilitate logistics and help companies meet extended producer responsibility (EPR) obligations.“Companies operate such platforms elsewhere in the country,” Roy said. “We wanted similar platforms to come to TN and operate from here. So we offered a payroll-based subsidy for such entities.”Initially, the policy focuses on four sectors—textiles, automobiles, electronics and plastics—where circular practices could generate significant economic and environmental gains. Roy said the government deliberately limited the scope due to the sector’s complexity.“The area is very wide, and we are not very sure about the financial implications,” he said. “So, for a start, we have limited it to four sectors. But that does not stop us. If there is demand, we can always amend the policy and extend it to other sectors.” Industry representatives view the initiative as an important shift in framing circular economy efforts as industrial opportunities rather than purely environmental interventions.“This policy exemplifies how moving towards a circular economy is necessary not only for the environment but also for business, especially for a leading export-oriented state like Tamil Nadu,” said Priyal Shah of WRI India. “The incentives for MSMEs—especially for quality certification, employment and skilling—were well thought through,” she added.Shah noted that the selected sectors account for a large share of the state’s GDP, exports and waste generation, making them a strong starting point.However, scaling circularity will require major investments in recycling infrastructure and supply chains. The automobile sector alone is expected to generate a large scrappage pipeline, with 1.56 crore vehicles in TN projected to enter the scrapping market by 2030. To manage this, the state has introduced a framework for establishing registered vehicle scrapping facilities (RVSFs) aligned with the Centre’s Vehicle Scrapping Policy.“RVSFs were set up in South Indian states, including Tamil Nadu, only in 2025–26, and scrappage rates are expected to rise in the coming years,” said Nithin Chandra, senior partner at Kearney.He added that govts must address residual value concerns through incentives such as scrappage-linked financing and road-tax concessions, while gradually making Automated Testing Stations the default pathway.Chandra also pointed out that industry players must strengthen partnerships with registered vehicle scrapping facilities to meet extended producer responsibility commitments. OEMs, dealers and financiers should work with RVSFs to offer bundled solutions combining financing, insurance and scrappage value realisation, encouraging a shift to cleaner mobility.
