Government finalizes the Vehicle Scrappage Policy

Aspects to know about the Government’s Vehicle Scrappage Policy.

● Scrapping of old vehicles is voluntary.● A fitness test is mandatory after the completion of the registration cycle.● Infrastructure set up for giving shape to the Vehicle Scrappage Policy.

The scrapping of old vehicles that have outlived their utility is necessary to protect the vehicle owner’s interest and the environment at the same time. Therefore, the Government of India has greenlighted its Vehicle Scrappage Policy to phase out unfit and environment polluting vehicles in a structured manner. It has announced the setting up of necessary infrastructure in the form of Automated Testing Stations along with Registered Vehicle Scrapping facilities.

India's Prime Minister, Narendra Modi, has tweeted that the launching of India's Vehicle Scrappage Policy is a critical milestone in the journey of India's development. While reiterating the significance of setting up vehicle scrapping infrastructure, he has requested the youth and start-up entities to be a part of the programme. He added that it would help India phase out vehicles unfit for travelling on the roads and play a vital part in preserving the environment. Besides, it creates a viable circular economy that brings value for all stakeholders and makes everyone environmentally responsible.Nitin Gadkari, Union Minister, Road Transport and Highways, lauded the Automobile Industry for being the country's highest revenue and employment generator. He stated that the Indian Government looks forward to providing support to sustain this industry.

Vehicle Scrappage Policy – The Timeline

● The policy will begin with the mandatory testing of all heavy commercial vehicles from April 01, 2023.● All private vehicles will undergo the mandatory fitness test from June 01, 2024.Vehicle Scrappage Policy – The Eligibility● The Vehicle Scrappage Policy is voluntary. Hence, it provides relief to vintage cars and well-maintained classic vehicles.● The policy takes effect after the completion of the vehicle’s registration cycle. Generally, it is ten years for commercial vehicles and 15 years for private vehicles. ● The reason is that the vehicle starts polluting the environment more after its registration life than it did when new.● The new Vehicle Scrappage Policy has age criteria but emphasises the fitness checks from its Automated Fitness Stations.Vehicle Scrappage Policy – Fitness test criteria● All vehicles should undergo the mandatory fitness test after the completion of their registration period.● If the vehicle fails the fitness test, it will not receive the renewal certificate. However, the owners will be informed of the reasons for rejection and allowed to undergo the test two more times. If the vehicle still fails the test, it will be scrapped mandatorily.

● The vehicle has to undergo fitness tests every five years to continue running on the road.Vehicle Scrappage Policy – What happens if the vehicle fails the test● If the vehicle fails the initial test, it will get two more opportunities for renewing the registration certificate.● If it fails the subsequent tests, it will be scrapped.● Driving any vehicle without a proper registration certificate is illegal.Vehicle Scrappage Policy – Renewal of registration and payment of Green Tax● The Government proposes to set up Automated Fitness Centres across India to check vehicles for pollution and emission of harmful gases. It will also emphasise brake tests, engine performance, and more.● On passing the test, the vehicle gets a renewal certificate subject to the payment of a Green Tax that could vary from one state to another, depending on the fuel used in the vehicle and the vehicle's type.● Electric vehicles, hybrid vehicles, and those using alternative fuels like CNG, LPG, or ethanol get a clear exemption.● The owners have to pay the applicable fees for renewing the vehicle’s registration.● The Government feels that these additional costs should discourage people from holding on to their old vehicles, especially those past their prime.

Vehicle Scrappage Policy – Benefits for the owner

The vehicle owners deciding to scrap their vehicles get the following benefits.● The vehicle's scrap value will be between 4 to 6% of the ex-showroom price of the vehicle.● The Government has advised manufacturers to offer a discount of 5% on purchasing a new vehicle on producing the scrappage certificate. However, manufacturers can find it challenging to offer this discount, especially in the backdrop of rising commodity costs like steel. As a result, there could be a price hike followed by a discount offer.● The Government proposes a tax rebate of up to 25% on the new vehicle's road tax. Besides, it waives off the registration tax on the new car.

Recycling old and polluting vehicles can prove beneficial for the auto industry. It can help in the recycling of steel and help stabilise steel prices. Besides, scrapping of the old models can help encourage people to purchase new models and thus, boost the auto industry, and in turn, the economy.