PM Modi launches Vehicle Scrappage Policy; move to benefit auto sector

New Delhi: Prime Minister Narendra Modi launched a Vehicle Scrappage Policy. The Policy was first presented in the Union Budget 2021 by Finance Minister Nirmala Sitharaman. Soon after, Union Minister for Road, Transport and Highways Nitin Gadkari revealed the details of the Policy at a Lok Sabha Session and notified the new Vehicle Scrappage Policy. While the new Scrappage Policy is voluntary, it would require mandatory fitness tests for vehicles after a certain duration.

What is this Policy?: Much like the western countries, the Scrappage Policy comes into effect when a vehicle’s registration is complete. In general, a passenger vehicle has a life of 15 years and a commercial vehicle has a life of 10 years, after which they become obsolete and also start polluting the environment at a greater intensity than they would have been doing earlier.

In western countries, these old vehicles are sent to scrapyards where they are dismantled and the steel used for making the body is crushed and recycled again. In India though, there was no such policy. Most of the vehicles either are on run currently polluting the environment or are lying at road sides.

Getting off older vehicles will generate space for new vehicles, which will boost the sales in the otherwise battered and bruised Indian auto industry. Nitin Gadkari explained that once the registration of the vehicles is over, they will have to take a mandatory fitness test. However, they can also avail scrapping options.

What is the time limit?

Not all vehicles will be scrapped as this is a voluntary scheme and not a mandatory one. However, there’s a catch here. All vehicles over and above the time limit will have to undergo mandatory fitness tests. If a vehicle fails a fitness test, they will not get a renewal certificate and won’t be able to run on the road. 

However, if they pass a fitness test, they will have to undergo a fitness test after every 5 years again to show their road worthiness.

What are the benefits?

1) A scrap value of the ex-showroom price of vehicle ranging from 4-6 percent will be given to the owner if they choose to scrap the vehicle

2) A rebate of up to 25 percent will be given in Road Tax

3) Vehicle manufacturers will be advised to give 5 percent discount on new vehicles against a scrapping certificate

4) No registration fees for vehicles.

What is a fitness test?

A fitness test, much like Pollution Under Control (PUC) certificate test, determines the road worthiness of a vehicle and checks if the vehicle is harming the environment. But that’s one aspect of it. Various other tests like brake test, engine performance among others will be in place to check the quality of the vehicles. 

 A fitness test, according to Nitin Gadkari, will be conducted at automated fitness centres. These centres will be established under PPP model and it is estimated that each fitness test will set you back by at least Rs. 30,000-40,000 and a green cess will also be levied while renewing the vehicle registration. The Government is hoping that all these additional costs will dissuade vehicle owners from retaining the vehicle.

What happens if a vehicle fails a fitness test?

The vehicle will not be given a renewed registration certificate which means the vehicle is not registered to run on the road. As per the MV Act, it’s illegal to drive a car without a RC. Reports suggest that one can undertake a fitness test only three times post which the vehicle will anyways won’t be road-worthy.

Policy applicable date

While the policy has been launched by PM Modi today, it will take time to implement the policy on the ground level as scrapping centres are not ready yet. From 2023 onwards, heavy commercial vehicles need to be scrapped if they do not conform to the fitness level prescribed under the rules. For personal vehicles, there is a plan to implement from June 2024.