A memorandum of understanding (MoU) was signed between the company and MSTC, Mahindra Intertrade said in a statement.
The proposed facility will be equipped with state-of-the-art, fully automated end-of-life vehicle recycling equipment and will be India's first such facility, it added.
MSTC Chairman and Managing Director S K Tripathi said: "MSTC is always looking at innovative ways to recycle scrap and protect the environment and this facility will help to participate in the emission targets which India has promised to fulfil via the COP 21 Emission Treaty."
"If India focuses on scrapping old automobiles, it can recover significant amounts of steel scrap, aluminium scrap, plastic and rubber. Hence, there is a pressing need for facilities such as this one," he said.
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Given the new stricter norms related to road worthiness of automobiles, a huge number of vehicles are expected to come under the end-of-life category in India, the company said in a statement.
"While the number of cars has increased substantially over the last two decades, there is no recycling or scrapping provision in place to deal with old and discarded vehicles," Mahindra Partners Managing Partner Zhooben Bhiwandiwala said.
Recycling, if done correctly, is not only environment friendly but will also help keep older vehicles off the streets, he added.