Indian Vehicle Scrappage Policy

A vehicle scrappage policy entails removing old vehicles from Indian roads through a government-funded program. A reduction in pollution, job creation and a boost to new vehicle demand are expected to result from this policy. To boost their respective automotive industries and curb vehicular pollution, several countries have introduced scrappage policies. They include the US, Germany, Canada and China. As an example, the US offers incentives to scrap older vehicles and replace them with new, more fuel-efficient ones under the Car Allowance Rebate System (CARS), also known as Cash for Clunkers. The government has announced a voluntary scrapping policy in its annual budget speech on February 1, 2021. According to Nirmala Sitharaman, the policy will phase out old, unfit vehicles, reducing pollution from vehicles and the cost of oil imports.

A much-awaited vehicle scrappage scheme was introduced to the Lok Sabha by Nitin Gadkari, the Minister of Road Transportation and Highways on March 18, 2021. If a commercial vehicle is over 15 years old or a passenger vehicle is over 20 years old, and they don't pass the fitness and emission tests, they will be scrapped mandatory. In order to cut urban pollution levels and stimulate automotive sales, which still struggle during India's recovery phase following COVID, the plan is to phase out cars and CVs older than 15-20 years. In addition, the scrappage of vehicles is also considered to be a part of a stimulus package mainly promoted by original equipment manufacturers (OEMs) in order to spur production.

The following incentives may be offered to scrap your old vehicle and buy a new one:

• New vehicles can be discounted by up to 5% by vehicle manufacturers.
• The fee for new registration is zero.
• State governments can give rebates of 25% for personal vehicles and 15% for commercial vehicles on their road taxes, respectively.
• The reduction of maintenance costs and the increase in fuel savings
• Vehicles that are kept old face various disincentives:
• "Green Taxes" are an additional tax that states can impose.
• Fee increase for renewing personal vehicles' registrations.
• A rise in commercial vehicle fitness certification renewals.
• Vehicles are deregistered automatically if they are not fit.

The following vehicles will be exempt:

• Vehicles with strong hybrid and electric performance.
• Alternative fuel-powered vehicles, including CNG, ethanol, and LPG.
• Equipment for farming and agriculture, such as tractors, tillers and harvesters.

A tentative timetable and benefits are listed below:

• The Ministry of Road Transport and Highways (MORTH) hasn't specified a timeframe for when the appointments will be generated online, but the following approximate timeframes:
• A set of rules will be announced on October 1, 2021, for fitness scrapping centres.
• A fitness test will be conducted for vehicles operated by government and public entities (PSUs) on April 1, 2022.
• A heavy commercial vehicle fitness test will take place on April 1, 2023.
• Other categories will be included in fitness test rules on June 1, 2024.

Several potential benefits are projected by MORTH:

• India's automobile industry will see a 30% increase in revenues from the current US$4.5 billion to US$10 billion in the next few years.
• There is a possibility that the export component of the current turnover of Rs. 1.45 lakh crore will reach Rs. 3 lakh crores in the near future.
• It is expected that scrapped materials such as steel, plastic, rubber and aluminium will increase in availability. Manufacturing automobile parts will be made more cost-effective with this technology, reducing the cost by 30-40%.
• In addition to promoting green fuel and electric vehicles, promote new technologies for better vehicle mileage.
• Reducing India's massive crude import bill by Rs. 10 lakh crores.
• 35,000 jobs will be created and new investments of Rs 10,000 crore are expected.

Vehicle Scrappage Policy: What is for Automotive Industry -

Several million medium and heavy commercial vehicles (M&HCVs) older than 15 years do not have active fitness certificates, as well as 51 lakh light motor vehicles (LMVs) older than 20 years and the number of light motor vehicles (LMVs) older than 15 years is 34 lakhs. A commercial vehicle's average age is over a decade, but a private vehicle's average age is between 10 and 15 years. In addition to boosting heavy and medium commercial vehicle sales, the proposed policy is also expected to stimulate sales of light trucks, which were almost flat since 2018.

Vehicle Scrappage Policy: What is for Auto Manufacturers - 

Due to the economic slowdown, manufacturers struggle with declining sales of commercial vehicles. This has been exacerbated by the bankruptcy of Infrastructure Leasing & Financial Services (IL&FS) and revised load-carrying norms, which increased the capacity of trucks by more than 20%. In addition to this, the Covid-19 pandemic has affected truck and bus sales further. According to proposed vehicle scrappage rules, commercial vehicles without a fitness or emission certificate that meet government requirements will have to be abandoned or scrapped after 15 years. Increasing sales will benefit Tata Motors and Ashok Leyland.

According to a spokesperson from Tata Motors, this move from the union government will ensure that old and polluting vehicles are removed from the system. This policy includes provisions such as requiring fitness certificates for commercial vehicles and disincentivizing truck registration after 15 years. As a whole, it addresses the aims of all stakeholders by reducing imports of scrap and crude oil, creating jobs for Micro, Small, and Medium Enterprises (MSMEs), reducing operational costs for vehicle owners, and providing cleaner and safer vehicles for consumers and consumers.

Among the obstacles that have to be overcome in order for the Vehicle Scrappage Policy to take effect were:

It is crucial to building a nationwide infrastructure of testing and scrapping centres as soon as possible so that the proposed policy will succeed. The implementation of the scrappage policy will be challenging due to a lack of infrastructure. Only seven automated fitness testing centres and two scrappage centres are available in India at the moment, both of which are insufficient to meet market demand. Furthermore, the deregistration of vehicles must be simplified as well. The process of deregistering a vehicle at present is a traumatic experience for most vehicle owners who wish to sell their old vehicles or scrap them, thereby discouraging many from disposing of them. Nevertheless, the Society of Indian Automobile Manufacturers (SIAM) is working with the government to establish an infrastructure for vehicle testing and scrappage throughout the country, in order to overcome this challenge.