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Vehicle Scrappage Policy

December 8, 2020

The rising air pollution in the major cities of the country is a major health and environment concern with 65% of total air pollution caused by older commercial vehicles plying on road. To arrest this issue, the Ministry of Road Transport and Highways is slated to scrap vehicles older than 20 years under the vehicle scrappage policy or voluntary vehicle fleet modernization program, first mooted in 2016.

A scrappage policy is a government-funded programme to promote the replacement of old vehicles with modern ones. A vehicle scrappage programme is usually intended to stimulate the automotive industry as well as taking obsolete and more polluting vehicles off the road.

It proposes to remove old commercial vehicles off the road and moot creation of an ecosystem to promote scrapping and recycling.

The policy is expected to considerably impact environmental sustainability and give thrust to automobile sector by creating new demand. The policy can be viewed as an extension of NGT ruling for Delhi-NCR whereby diesel vehicles older than 10 years were ordered to stop plying on the road. Similar policies have been implemented in countries like US, UK, China, Indonesia etc. to drive auto industry and reduce pollution.

 Key Provisions of Draft Policy:

  1. Rebates on road tax and registration fees on new car will be given upon showing certificate of scrapping by the vehicle owner.
  2. Vehicle scrapping centres will be set up across the country.

For example, Mahindra has announced partnership with Metal Scrap Trade Corporation Ltd (MSTC) and set up scrappage centres called Mahindra Accelo which is the first government authorised scrappage centre in the country.

  1. Vehicles can be offered for scrapping if they are –
    • impounded or abandoned by enforcement agencies,
    • beyond repair,
    • registration certificate has not been renewed (15 years’ time period)
    • damaged due to fire, natural calamity, etc.
  2. An authorized vehicle scrapping facility –
    • Should meet the minimum technical requirements for collection and dismantling centres specified as per the guidelines issued by the Central Pollution Control Board.
    • Must have ‘competent manpower’ to carry out dismantling activities, keeping in mind responsibilities towards the environment.
    • Need to take no objection certificate from State Pollution Control Board within six months since the beginning of operations, according to the draft guidelines.
    • Must install CCTV cameras which can be audited by government authorities to check compliance with guidelines.
  3. Vehicles cannot be scrapped till fuel, oil and other gases are drained and collected as per in certified containers.
  4. A separate record of scrapped vehicles will also have to be registered in the National Register for Vehicles (VAHAN), which has to be maintained by the Centre.
  5. The auto industry agreed to the Centre’s proposal to offer a 1% discount on buying new vehicles if along with it an old one is junked.
  6. The government proposed renewal of fitness certificates for vehicles older than 15 years every six months instead of the current one year.
  7. The scrapping certificate will be transferrable and will also facilitate discounts on the purchase of new vehicles.
  8. The hike in registration fees for vehicles older than 15 years will increase to INR 15,000 from the current INR 600 and re-registration fee for such vehicles will be hiked to INR 40,000 from the current INR 1,500.

Benefits:

  1. For Government coffers: The proposal is proposed to boost tax revenues to the tune of INR 10,000 crores from the automobile sector.
  2. Containing oil Imports: Scrapping old vehicles is expected to reduce oil consumption by 3.2 billion litres per year saving nearly INR 7,000 crore in oil import.
  3. Alignment with Make in India: It would result in growth of automobile industry at an annual rate of 22% making India a hub for automobile manufacturing.
  4. Competition in Automobile Industry: The competitiveness of automobile industry is expected to improve as factor costs are expected to reduce with the easy and cheap availability of scrap metal for forging auto parts.
  5. Curb air pollution: Withdrawing old vehicles non-compliant with BS-I and BS-II standards from the road would reduce air pollution in cities.
  6. For the steel industry: The policy will help in the revival of India’s steel industry by generating fresh demand and lower steel imports.

 Concerns by Niti Aayog:

  1. Concerns over the definition of the life or age of a vehicle may result in an economic loss for the vehicle owner due to scrapping the vehicle.
  2. It is feared that India may face the same fate as the US after it implemented the Cash for Clunkers scheme that used to provide financial incentives to car owners but even after spending $3 billion, it failed to stimulate.

The vehicle scrappage policy aligns with other initiatives of the central and state government which aims to reduce vehicular pollution by promoting use of clean alternative fuels, promotion of hybrid electric vehicles (FAME) and advancing the adoption of BS VI stage emission standards for vehicles. The proposed policy will have no effect on Electric Vehicles though, as for Electric Vehicles there is a separate Electric Vehicle Scrappage Policy that was introduced by the Delhi State Government in 2019. In principle, the Delhi EV policy aims to register 5,00,000 electric vehicles in the city by 2024, driven by a flurry of incentives offered by the state government through its newly incorporated ‘State EV Fund’ as well as the State Electric Vehicle Board, which will be chaired by the transport minister, Mr. Kailash Gahlot.

The Delhi EV policy has in store a scheme for offering various incentives to prospective customers a summary of the same can be found below –

  • Electric two-wheelers – up to Rs 30,000 incentive from the state government
  • Electric passenger vehicles – up to Rs 1,50,000
  • Auto-rickshaws – up to Rs 30,000
  • E-rickshaws – up to Rs 30,000
  • E-goods carriers – up to Rs 30,000

Endnotes:

  1. https://www.businesstoday.in/sectors/auto/scrappage-policy-carmakers-agree-to-give-1-discount-on-new-vehicles-if-old-one-junked/story/420926.html
  2. https://auto.hindustantimes.com/
  3. https://www.businessinsider.in/business/auto/news/india-may-announce-vehicle-scrappage-policy-soon-and-this-is-what-it-means-for-consumers-and-new-buyers/articleshow/79041346.cms
  4. https://neostencil.com/vehicle-scrappage-policy
  5. https://www.news18.com/news/auto/cabinet-note-formulated-for-vehicle-scrappage-policy-in-india-likely-to-come-into-effect-soon-3040649.html
  6. https://www.jatinverma.org/scrappage-policy-hits-another-roadblock-after-niti-flags-issues
  7. https://www.autocarindia.com/car-news/delhi-government-notifies-ev-policy-418241

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