Vehicle scrappage policy: Details, benefits, rules and more
PM Modi said that the national policy will give a new identity to the auto sector and promote a circular economy, making the process of economic development more sustainable and environment-friendly.
“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 & Convenient Mobility, is the need of the hour,” Modi said.
What is vehicle scrappage policy all about
The policy aims to scrap old, unfit and polluting vehicles by creating an infrastructure for automated testing of vehicles that have completed the registration period.
As per law, a registration certificate for a passenger vehicle is valid for 15 years from date of issue. For a commercial vehicle, it is valid for a period of 10 years.
The scrappage policy will come into effect after the expiry of this 10 or 15 year period. The vehicle will then have to undergo a mandatory fitness test.
As per the motor vehicle law, renewal of fitness certificate annually is mandatory for a commercial vehicle once it is older than eight years. For the first eight years, such vehicles will need to undergo the test after every two years.
Vehicles to be judged on basis of fitness test
Fitness tests are required to know the quality of the vehicle, if it is still fit to run on the roads and how much effect it will have on the environment.
A vehicle will be declared fit or unfit after conducting multiple tests like brake test, engine performance and others.
If a vehicle passes the fitness test then it will have to repeat the same after every 5 years to keep a check.
A valid fitness certificate will be necessary for renewal of registration certificates after 15 years. The renewed certificate will be issued for a period of 5 years in case of private vehicles.
Which vehicles will be scrapped?
Under the new policy, vehicles will not be scrapped merely on the basis of age. As mentioned earlier, they will be scientifically tested through authorised, automated testing centres.
Unfit vehicles will be scrapped scientifically which will ensure that registered vehicle scrapping facilities all over the country are technology driven and transparent.
The term ‘unfit’ vehicles include those who fail to qualify a fitness test; have been damaged due to fire, riot, natural disaster, accident or any other calamity; declared obsolete or beyond repair; vehicles which have outlived their utility.
A vehicle which fails the fitness test is deemed unfit from plying on the roads and their registration certificates will not be renewed.
However, one re-test will be permitted after the necessary repair, rectification, and re-inspection — if ordered by the appellate authority. If it fails the re-test too then the vehicle will be declared an end of life vehicle (ELV).
Since it is a voluntary scheme, owners of such vehicles will have the option of scrapping their vehicles. He or she will have to take the vehicle to a registered vehicle scrapping facility.
Incentives for scrapping old vehicles
The Centre has announced several incentives that will be offered to people for retiring their old and unfit vehicles.
Firstly, owners of such vehicles will get a scrap value which will be equivalent to 4 per cent to 6 per cent of the ex-showroom price of the new vehicle that they would be purchasing.
Secondly, there will be zero registration fees for new vehicle purchased if the owner shows a certificate of deposit.
Thirdly, state governments have been asked to offer concessions on motor vehicle tax. The concessions include up to 25 per cent for non-transport vehicles and up to 15 per cent for transport vehicles.
Fourthly, vehicle manufacturers have been advised to provide 5 per cent discount on purchase of new vehicle against certificate of deposit.
Opting for a new vehicle will also lower maintenance cost and consumers will be able to have increased savings on fuel too.
Disincentives for holding old vehicles
Holding on to vehicles older than 15 years will become an expensive affair for owners as cost for renewal of fitness certificate might go up by 62 times for commercial vehicles and by 8 times for private vehicles.
In addition, states will impose green tax over and above the road tax that every vehicle owner needs to pay.
When will the policy come into effect
Personal vehicles that are older than 20 years will be de-registered from June 1, 2024 if they fail the automated fitness test or their registration certificates have not been renewed.
Similarly, heavy commercial vehicles older than 15 years will be de-registered from April 1, 2023.
Automated testing stations and registered scrapping facilities
The Centre has mandated setting up of automated testing stations to minimise manual testing of vehicles as per the road map.
In the first phase, 75 stations have been proposed to be set up. It will then be scaled up to 450-500 stations across the country.
The government has also encouraged private players to invest in setting up such stations through PPP route in partnership with the state governments.
Similarly, registered vehicle scrapping facilities will be set up across the country to promote safe scrapping of the vehicles. The Centre plans to set up 50-70 such facilities in the next 4-5 years.
‘Beneficial for all stakeholders’
Cheap raw material acquired from scrapped vehicles would bring down the price of vehicles and boost their sales. This will also help in raising the Centre’s GST collection, union minister Nitin Gadkari said.
He further said that the policy will be beneficial for all stakeholders.
“It will boost manufacturing, create employment and increase our savings. 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 per cent of the materials. As per an estimate, this will lead to a reduction of 40 per cent in the raw material cost, which will lead to reduction in prices and higher sales,” said the minister.