The Prime Minister recently launched the National Automobile Scrappage Policy, also known as the Vehicle Scrapping Policy, at an Investor Summit in Gujarat. The policy, announced by the government in March 2021, aims to address the issue of aging and polluting vehicles in India. Following this policy launch, investors are invited to invest in the development of vehicle scrapping infrastructure.
Policy Provisions and Objectives
The Vehicle Scrapping Policy is expected to cover approximately 51 lakh Light Motor Vehicles (LMVs) that are over 20 years old and an additional 34 lakh LMVs that are more than 15 years old. The main objective is the reduction of old and malfunctioning vehicles to decrease vehicular air pollution and improve road and vehicular safety.
Vehicles will be required to undergo a fitness test before re-registration. Commercial vehicles older than 15 years and private vehicles older than 20 years will be scrapped if they fail this test, which will revolve around emission levels, braking system, and safety components.
Financial Incentives and Disincentives
In order to encourage owners to scrap their old and unfit vehicles, state governments may offer a road tax rebate of up to 25% for personal vehicles and up to 15% for commercial ones. Vehicle manufacturers will also provide a 5% discount to those who present a ‘Scrapping Certificate’. Furthermore, registration fees will be waived off for the purchase of new vehicles.
Conversely, a financial disincentive will be implemented for vehicles 15 years or older from the initial registration date in the form of increased re-registration fees.
Economic and Environmental Impact
This policy initiative is expected to have a significant economic and environmental impact. It will stimulate the creation of scrap yards across the country, facilitating the effective recovery of waste from old vehicles. The creation of more fitness centers will result in an estimated employment of 35,000 people and an injection of Rs 10,000 crores into the economy.
With the increased sale of heavy and medium commercial vehicles, an additional income of Rs 30,000 to 40,000 crores is expected from Goods and Services Tax (GST). Prices of auto components are projected to drop due to cheaper scrap materials, consequently reducing the production cost for vehicle manufacturers.
From an environmental perspective, the policy will assist in phasing out polluting vehicles, promoting a circular economy and the ‘waste to wealth’ campaign. It’s estimated that older vehicles pollute the environment 10 to 12 times more than newer ones.
Supplementary Initiatives
This effort is supplemented by other initiatives to reduce vehicular pollution, such as the Go Electric Campaign, FAME India Scheme Phase II, Delhi’s Electric Vehicles (EV) Policy 2020, Hydrogen Fuel Cell Based Bus and Car Project, and National Electric Mobility Mission 2020.