Vehicle Scrapping Policy. Aims, Objectives and Benefits of Vehicle Scrapping Policy.

Benefits of Vehicle Scrappage Policy
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The Prime Minister while addressing the Investor Summit in Gujarat via video conferencing launched the Vehicle Scrapping Policy National Automobile Scrappage Policy.

Background of Vehicle Scrapping Policy

  • The Summit will invite investment for setting up vehicle scrapping infrastructure under the Vehicle Scrapping Policy.
  • The Vehicle Scrapping Policy was announced in March 2021 by the government.
  • The policy is estimated to cover 51 lakh Light Motor Vehicles (LMVs) that are above 20 years of age and another 34 lakh LMVs above 15 years of age.
PM launches Vehicle Scrappage Policy

Aims of the Policy:

  • Reducing the population of old and defective vehicles, bringing down vehicular air pollutants, improving road and vehicular safety.
    • To phase out and recycle old vehicles through a systematic process.
    • The final goal of the policy is to reduce environmental pollution caused by old vehicles that have surpassed their lifecycle and run without a valid fitness certificate.
    • Recycling old vehicles will help in reusing key materials like steel, plastic and copper. This will result in reducing the cost of manufacturing.
    • The policy also aims to provide a boost to vehicle sales in the country, given the incentives offered for buying a new car.

Provisions for Vehicle Scrapping Policy :

  • Fitness Test:
    • Old vehicles will have to pass a fitness test before re-registration and as per the policy government commercial vehicles more than 15 years old and private vehicles which are over 20 years old will be scrapped.
      • Old vehicles will be tested at authorized Automated Fitness Center and will not be scrapped merely on the basis of age.
        • Emission test, braking system, safety components will be tested and the vehicles which fail in the fitness test will be scrapped.
        • If the old vehicle passes the test, the owner can continue to use it, but the charges for reregistration will be much steeper.
        • The Union Road and Transport Ministry has also issued rules for registration procedure for scrapping facilities, their powers, and scrapping procedure to be followed.
    • Road Tax Rebate:
      • The state governments may be advised to offer a road-tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles to provide incentive to owners of old vehicles to scrap old and unfit vehicles.
    • Vehicle Discount:
      • Vehicle manufacturers will also give a discount of 5% to people who will produce the ‘Scrapping Certificate’ and registration fees will be waived off on the purchase of a new vehicle.
    • Disincentive:
      • As a disincentive, increased re-registration fees would be applicable for vehicles 15 years or older from the initial date registration.

Significance of Vehicle Scrapping Policy :

  • Creation of Scrap yards:
      • It will lead to creation of more scrap yards in the country and effective recovery of waste from old vehicles.
      • India had to import 23,000 crore worth of scrap steel during the last year as India’s scrapping is not productive and India is not able to recover energy and rare earth metals.
    • Employment:
      • In the new fitness centers, 35 thousand people will get employment and an investment of Rs 10,000 crores will be pumped in.
    • Improved Revenue:
      • This will boost sales of heavy and medium commercial vehicles that had been in the contraction zone as a result of economic slowdown triggered by the bankruptcy of IL&FS (Infrastructure Leasing & Financial Services) and Covid-19 pandemic.
      • The government treasury is expected to get around Rs 30,000 to 40,000 crores of money through Goods and Services Tax (GST) from this policy.
    • Reduction in Prices:
      • Prices of auto components would fall substantially with the recycling of metal and plastic parts.
      • As scrapped materials will get cheaper the production cost of the vehicle manufacturers will also reduce.
    • Reduce Pollution:
      • It will play a major role in modernising the vehicular population as it will help in phasing out the unfit and polluting vehicles across the country and promote a circular economy and waste to wealth campaign.
      • As older vehicles pollute the environment 10 to 12 times more, and estimated that 17 lakh medium and heavy commercial vehicles are more than 15 years old.

Proposed Incentives, Disincentives and Exemptions

Incentives for scrapping old vehicles and buying new ones:

  • Vehicle manufacturers can give up to 5% discount for buying new vehicles
  • Zero new registration fee
  • Scrap value equivalent of 4-6% of ex-showroom price of new vehicles
  • States can give up to 25% and 15% rebate on road tax for personal and commercial vehicles, respectively
  • Reduced maintenance cost and increased savings from fuel

Disincentives for keeping old vehicles:

  • States can levy an additional ‘Green Tax’
  • Hike in renewal of registration fee for private vehicles
  • Increase in renewal of fitness certification for commercial vehicles
  • Automatic deregistration of unfit vehicles

Vehicles to be exempted:

  • Strong hybrids and electric vehicles
  • Vehicles using alternative fuels such as CNG, ethanol and LPG
  • Farm and agricultural equipment such as tractors, tillers and harvesters

Benefits of Vehicle Scrapping Policy

  1. Owners who scrap their old vehicle and plan to buy a new one will get incentives as part of the Vehicle Scrappage policy.

2. A value of the ex-showroom price of the old vehicle, ranging from 4 per cent to 6 per cent, will be given to the owner when they choose to scrap the car.

3. A rebate of up to 25 per cent of road tax will be given to a person when he buys a new personal vehicle after scrapping an old one; the rebate will be up to 15 per cent for commercial vehicles.

4. In addition, vehicle manufacturers have been advised to give a 5 per cent discount on new vehicle purchases to individuals who produce a scrapping certificate and a waiver on the registration fee.

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