VEHICLE SCRAPPAGE POLICY 2021: Expectations and Challenges

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Overview

The vehicle scrappage policy is a government-funded program to replace old vehicles from Indian roads. The policy is expected to reduce pollution, create job opportunities, and boost demand for new vehicles. Several countries like the US, Germany, Canada, and China have introduced vehicle scrappage policies to boost their respective automotive industries and check vehicular pollution. For instance, the US has implemented the Car Allowance Rebate System (CARS), also called the Cash for Clunkers program, which offers credit incentives on scrapping older vehicles and replacing them with a new and more fuel-efficient vehicle.

On February 1, 2021, Finance Minister Nirmala Sitharaman stated in her annual budget speech, “the government will announce a voluntary vehicle scrapping policy to phase out old and unfit vehicles.” She added the move would help in encouraging fuel-efficient, environment-friendly vehicles, thereby reducing vehicular pollution and oil import cost.

On March 18, 2021, Nitin Gadkari, Minister for Road Transport & Highways, introduced the much-awaited vehicle scrappage scheme in the Lok Sabha. 

Vehicles coming under the policy

  • Commercial Vehicles more than 15 years old have to be scrapped, if they do not pass fitness and emission tests.
  • Passenger vehicles more than 20 Years old have to be scrapped, if they do not pass fitness and emission tests.

Exemptions

  • The Strong hybrids and electric vehicles
  • Vehicles using alternative fuels such as CNG, ethanol, and LPG
  • Farm and agricultural equipment such as tractors, tillers, and harvesters

Tentative Timeline

  • October 1, 2021: Rules for fitness scrapping centers will be released
  • April 1, 2022: Fitness testing for government and public sector undertaking (PSU) vehicles
  • April 1, 2023: Fitness testing for heavy commercial vehicles
  • June 1, 2024: Fitness test rules be rolled out for other categories

Incentive

If the owner of the vehicle scraps an old vehicle and buys a new one, he or she will be applicable for the incentive program.

  • Vehicle manufacturers can give up to a 5% discount for buying new vehicles
  • Zero new registration fee
  • Scrap value equivalent of 4-6% of the ex-showroom price of new vehicles
  • States can give up to 25% and 15% rebate on road tax for personal and commercial vehicles, respectively
  • Reduced maintenance cost and increased savings from fuel

What if someone continues with the old vehicle

  • States can levy an additional ‘Green Tax’
  • Hike in the renewal of registration fee for private vehicles
  • Increase in the renewal of fitness certification for commercial vehicles
  • Automatic deregistration of unfit vehicles

Result 

  • Boost for the automobile industry since there is a huge number of vehicles supposed to be scrapped.

M&HCVs represents Medium and heavy commercial vehicles

LMVs represents Light motor vehicles

  • Reuses of scrapped material
  • Promote Green energy source
  • Pollution control 
  • New jobs will be created
  • Innovation towards Environment-friendly technology

Challenges

  • Infrastructure for scrapping centers
  • Educating vehicle owners.

“Good Environmental Policy is Good Economic Policy”