Vehicle Scrappage Policy in India: Benefits and Meaning

All You Need to Know About The Vehicle Scrappage Policy In India

Scrappage Policy

On Friday in the capital, New Delhi, Prime Minister Narendra Modi launched the much anticipated vehicle scrappage policy. The Prime Minister spoke about the much awaited policy, launching it nationwide. This policy is widely received as a welcome move by the nation in order to help improve the current unclear situation of old used cars that have surpassed their “shelf lives,” i.e., are older than 10-15 years. This policy is aimed at the eradication of the older vehicles and unfit vehicles that are prone to becoming huge safety issues in an environmentally friendly way. 

The Prime Minister said that this policy hopes to provide better recognition to the auto sector. He also said that it would also boost a circular economy which will not only be better for the sustainable economic development but it will also bring along with it a push towards a greener tomorrow. Furthermore, he also added that

“Modernity in mobility not only reduces the burden of travel and transportation but also proves to be helpful for economic development. The goal for 21st century India to be clean, congestion free, and convenient mobility, is the need of the hour.”

The vehicle scrappage policy has a multifaceted aim which in the long run will be fruitful for many sectors as well as help safeguard our environment. The policy’s objective is to scrap the old, unfit vehicles that cause pollution by building an infrastructure where there is the automated testing of vehicles that have exhausted their registration period. The registration period of a passenger vehicle is 15 years as per the law, and for the commercial vehicles, it stands at 10 years. The validity of registration certificates for both the commercial and non-commercial vehicles will play a role in the scrappage policy. This policy will come into action after the expiration of the registration certificates, that is, after a ten year or 15 year period. The vehicle, after the expiry of the registration certificate, has to undergo a mandatory fitness test.

The motor law of the nation says that the renewal of the fitness certificate ought to be done annually for commercial vehicles if they are older than eight years. For the initial eight years of the commercial vehicle, the vehicle has to pass the test every two years.

The fitness test will judge the quality of the vehicle, whether the vehicle is fit enough to get on the roads, and also the environmental impact the vehicle causes. The vehicle will undergo several tests in order to attain its certificate. There will be tests such as brake tests and engine performance, and many more. On the basis of clearing these tests, the vehicle will be judged as fit or unfit. On passing the fitness test, the vehicle will have to undergo the same test after every five years as well. In order to renew the registration certificate after fifteen years, this fitness certificate would be necessary. If this new certificate is issued, it will be only valid for 5 years, which is the case with private vehicles.

According to the policy, the vehicles won’t just get scrapped on the basis of their age alone, they would be tested first by the automated testing centers. The vehicles that would be deemed unfit will have to get scrapped. The scrapping of such vehicles is said to be done at various registered scrapping facilities, which will be available all over the country. These facilities would be technology-driven, and the vehicle will be labeled ‘unfit’ if it fails to qualify for the fitness test. This can happen for a variety of reasons, such as damage due to a natural calamity, accident, fire, riots, etc., or if it is declared beyond repair and obsolete. All the vehicles that have exhausted their life span and are now limited in their efficiency and utility shall also be included in the ‘unfit’ category. Once deemed unfit, their registration certificates will not be renewed, and hence they would be unable to return to the roads. 

This, however, can be reversed. As in, there shall be one re-test allowed if and only if the necessary repairs, rectifications, and re-inspections have been made. This shall be permitted only after the necessary steps have been ensured and if ordered by the appellate authority. No more chances shall be provided if the vehicle fails the re-test. Then, the vehicle shall be proclaimed an ELV or an end of life vehicle. 

The owners can opt to scrap their vehicles, it being a voluntary scheme. They will have to take the registered vehicle to a vehicle scrapping facility.

The scheme also comes with many upsides, including multiple incentives! Not only will replacing the unfit vehicle with a new one improve the quality of transport, but will lower maintenance costs, add efficiency and help save costs when it comes to fuel. The added incentives are the cherry on top of a very large cake! For those who opt to retire and scrap their vehicles, the Centre has disclosed several offers. For starters, they shall be rewarded with a scrap value that stands equal to about 4 to 6 percent of the ex-showroom price of the new vehicle they wish to purchase. The good news doesn’t end there, as the owners will be charged zero registration fees for their new vehicle if they carry and show their certificate of deposit. Additionally, vehicle manufacturers have also been advised to offer a 5 percent discount on the purchase of new vehicles when shown the certificate of deposit. On top of that, the state governments have also been asked to offer concessions on motor vehicle tax. These concessions are believed to be up to 25 percent and 15 percent for non-transport and transport vehicles, respectively. 

It is a well known fact that as vehicles near the age of 15, they are no longer as efficient or as sprightly as they once were. Not only do they cost a fortune in repairs and maintenance, but they also bring with them unwanted anxiety in the owners since no one can predict what problem might strike them next. Holding on to them for longer than what is necessary can result in a lot of unwanted expenses, as the cost of renewal of fitness certificates are bound to increase and are believed to go up by 62 times for commercial vehicles and 8 times for private ones! As if that is not plenty, the states shall also levy green tax alongside the pre-existing road taxes each vehicle owner must pay. If that is not worrisome, we don’t know what is. 

The policy will take effect differently for different types of vehicle owners. For private and personal vehicles over 20 years old that fail the automated fitness tests or do not have a renewed registration certificate, the date of “de-registration” is June 1, 2024. The commercial vehicles, on the other hand, will be de-registered from April 1, 2023. This is applicable to heavy commercial vehicles that are older than 15 years. 

In a bid to make it more efficient, the testing stations will be set up all across the country so that manual testing will be reduced to a bare necessary minimum. It will focus on getting things done as efficiently as one possibly can. The Center has proposed to set up around 75 stations initially and then expand to more than 450-500 stations all over the country. It is plausible that private players might invest in helping set up the stations via PPP in partnership with state heads at the urging of the government. 

In a similar fashion, registered vehicle scrapping facilities shall also be set up all over the country. Around 50-70 facilities are likely to pop up within the next five years. These registered facilities will promote safe scrapping of the vehicles and will be accessible to the public, enabling them to follow the policy without any issues. 

This policy would reap fruits for a lot many sectors. The extracted raw material from the unfit cars would result in bringing the prices of the vehicles down and hence would promote sales of the vehicles. This also helps the Centre, as it would lead to an increase in the GST collection. Hence, this policy is a win-win for every sector and stakeholder.

“It will boost manufacturing, create employment and increase our savings. The cost of new vehicles will also come down as the scrap would provide copper, aluminium, steel, plastic, and rubber to the industry,”

Gadkari added.

“If we recycle on a continuous basis, we can recover 99 percent of the materials. As per an estimate, this will lead to a reduction of 40 percent in the raw material cost, which will lead to a reduction in prices and higher sales,”

said the minister.

This policy is aimed to bring the auto sector in a cycle. Considering the current global climatic conditions, this policy is a step towards a greener future. The need of the hour is to recycle in a judicious manner, and this new policy will help the very big auto-sector of our nation to do so.