Every factory produces scrap: machining chips, rejected parts, offcuts, worn-out tools, packaging, replaced equipment and, eventually, entire production lines. In many units, scrap is an afterthought, collected in a corner and sold whenever the space runs out. That approach leaves money on the table and creates opportunities for theft and audit problems. This guide sets out a clear, step-by-step process manufacturers can follow to sell factory scrap profitably and compliantly.
Step 1: Assign ownership
Someone must own scrap. In smaller units this is usually the stores in-charge or plant manager; in larger ones, a purchase or commercial team with oversight from finance. The owner is responsible for:
- Maintaining the scrap register.
- Coordinating segregation with production and maintenance.
- Inviting quotes and recommending buyers.
- Ensuring documentation and payment.
Without ownership, scrap becomes everyone's problem and no one's priority.
Step 2: Identify your scrap streams
List every type of scrap your factory generates and estimate monthly quantities. A typical engineering unit in Varanasi might generate:
| Scrap stream | Source | Typical frequency |
|---|---|---|
| MS offcuts and plates | Fabrication | Weekly |
| MS / CI turnings | Machining | Daily |
| Cast iron rejects | Foundry or machining | Monthly |
| Copper cable and winding | Electrical maintenance | Quarterly |
| Aluminium sections | Projects and maintenance | Quarterly |
| Brass fittings | Plumbing and pumps | Quarterly |
| Old motors, pumps, machines | Replacement | Occasional |
| Pallets, drums, packaging | Stores | Monthly |
| E-waste | IT and controls | Occasional |
Knowing your streams helps you plan bins, storage and buyer arrangements.
Step 3: Segregate at source
The most valuable step happens on the shop floor. Provide labelled bins or bays for each scrap type close to where it is generated. Train operators and maintenance staff to drop material into the right bin. Segregation at source is cheap; sorting a mixed heap later is expensive and less accurate.
Key separations:
- Ferrous: MS, cast iron, stainless steel, turnings.
- Non-ferrous: copper, brass, aluminium, gunmetal.
- Electrical: cables, motors, transformers, panels.
- Non-metal: plastics, wood, paper, rubber.
- Hazardous: used oil, batteries, chemical containers, e-waste.
Step 4: Store safely and securely
- Keep high-value metals (copper, brass) in a locked store.
- Store turnings and chips under cover to avoid rainwater and oil runoff.
- Keep scrap away from fire risks and walkways.
- Record what goes into storage and what goes out.
Step 5: Get internal approval
For audit purposes, scrap disposal should be authorised. Common practice is:
- Stores prepares a disposal note listing items, estimated quantity and condition.
- For capital assets (machines, equipment), finance confirms the book value and approves write-off.
- The plant head or a committee approves the sale.
This trail protects the company and the people involved.
Step 6: Value the scrap
Before inviting buyers, estimate the value using current market rates for each grade. This gives you a benchmark to judge quotes. For capital equipment, consider whether the machine has resale value as working equipment, which may be higher than scrap value.
Step 7: Invite written quotes
Shortlist two or three professional buyers. Share photos, an item list and approximate quantities. Ask each for a written, grade-wise quote including:
- Rate per kg for each grade.
- Loading, cutting and transport responsibility.
- Weighbridge location.
- Deduction policy.
- Payment terms and timing.
- Documents they will provide.
- Rate validity.
Step 8: Award and schedule
Choose the buyer who offers the best overall terms, not just the highest headline rate. Confirm the award in writing and schedule a lifting date. If dismantling is involved, agree the safety plan, work permits and site restoration requirements.
Step 9: Lifting and weighment
On lifting day:
- A company representative supervises loading.
- Gate pass and material challan are prepared.
- Each truck is weighed at the agreed weighbridge: tare (empty) and gross (loaded).
- Slips are collected and matched to the vehicle numbers.
- Any deductions are recorded and signed off by both sides.
Step 10: Invoice, tax and payment
The company issues a GST tax invoice for the sale. Since October 2024, specific GST rules apply to metal scrap, including TDS on B2B supplies of metal scrap and reverse charge where an unregistered person supplies to a registered person. TCS under the Income Tax Act may apply to scrap sales. An e-way bill is required for movements above the threshold. Your accountant should confirm the correct treatment. Payment should be received in the company's bank account, matched against the invoice.
Step 11: Record and reconcile
Update the scrap register with quantities, rates, buyer, invoice number and payment details. Each quarter, reconcile scrap generated against scrap sold. Large gaps can indicate leakage.
Step 12: Move to a rate contract
If your factory generates scrap continuously, a rate contract can save time and improve prices. Typical contracts specify:
- Grades covered.
- Pricing method (fixed for a period or linked to a benchmark such as MCX for non-ferrous metals or a published steel index for ferrous).
- Pickup frequency (weekly, monthly or on call).
- Weighment, deductions and documentation.
- Payment terms.
- Review and exit clauses.
Common pitfalls
- Letting scrap pile up for a year, leading to rust, theft and difficult grading.
- Allowing buyers to load without supervision.
- Accepting verbal rates.
- Selling capital assets without finance approval.
- Ignoring hazardous waste rules for oil, batteries and e-waste.
Sample scrap register format
A simple spreadsheet is enough for most factories. Suggested columns:
| Column | Example |
|---|---|
| Entry date | 05-10-2026 |
| Department | Machine shop |
| Category | Ferrous |
| Grade | MS turnings |
| Quantity (kg) | 820 |
| Bin / bay | Bay 3 |
| Disposal date | 28-10-2026 |
| Buyer | Kabadi24 |
| Invoice no. | INV/SCR/112 |
| Rate (₹/kg) | 21 |
| Amount (₹) | 17,220 |
| Remarks | Dried before sale |
With this data, finance can calculate monthly scrap revenue by grade, compare rates with market benchmarks, and spot unusual drops in quantity that might indicate leakage.
A worked example of segregation payback
A medium engineering unit generates around 25 tonnes of mixed scrap each month. Before segregation, it sells everything as mixed MS at a conservative rate with deductions. After introducing labelled bins, it finds that roughly 1 tonne per month is aluminium, 300 kg brass, 200 kg copper, and 3 tonnes cast iron, with the rest MS and turnings. Selling these separately at their own grade rates adds a substantial amount every month, easily covering the cost of bins, signage and a few hours of training. The bigger benefit is ongoing: once segregation becomes routine, the uplift repeats every month.
Who should be involved
Selling scrap well needs a small cross-functional group: production and maintenance for segregation, stores for storage and records, finance for valuation and invoicing, security for gate control, and EHS for hazardous waste. A short monthly review among these functions keeps the system working and surfaces problems early.
Who should be involved
Selling scrap well needs a small cross-functional group: production and maintenance for segregation, stores for storage and records, finance for valuation and invoicing, security for gate control, and EHS for hazardous waste. A short monthly review among these functions keeps the system working and surfaces problems early.
How Kabadi24 supports manufacturers
Kabadi24 works with manufacturers across Varanasi, Chandauli, Mirzapur, Bhadohi, Jaunpur, Ghazipur, Sonbhadra and other Purvanchal districts, and through our Gurugram branch. We help set up segregation bins, survey and grade scrap on-site, give written grade-wise quotes, supply loading crew and trucks, weigh at certified weighbridges and handle complete documentation. For regular generators, we offer rate contracts with scheduled pickups. Our head office is at Industrial Area Phase 1, Ramnagar, Chandauli.
Conclusion
Selling factory scrap well is a process, not a phone call. Assign an owner, segregate at source, store securely, get approvals, invite written quotes, weigh transparently, document everything and reconcile regularly. With these steps, scrap becomes a reliable revenue line rather than a source of leakage.