Centre launches voluntary vehicle scrappage policy

The Centre on Monday announced a long-pending voluntary vehicle scrapping policy that is aimed at taking polluting, fuel-guzzling vehicles off the roads to reduce pollution and congestion.

Details of the policy, in the works since 2016, will be made public within 15 days, transport minister Nitin Gadkari said on Monday, after finance minister Nirmala Sitharaman said the government was “separately announcing a voluntary vehicle scrapping policy to phase out old and unfit vehicles.”

“This will help in encouraging fuel efficient, environment friendly vehicles, thereby reducing vehicular pollution and oil import bill. Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles,” Sitharaman said in her budget speech.

To put it simply, the vehicle scrapping policy aims to take old, polluting vehicles off the roads and send them to the scrapyard. Vehicles older than 15 years have very low resale value, and voluntarily sending them to the scrapyard will offer their owners monetary compensation that will help them to buy a new vehicle.

Gadkari said the vehicle scrapping policy will lead to new investments of around Rs.10,000 crore and create as many as 50,000 jobs.He said last year that it would also help recycle key raw material made available by scrapping vehicles, such as steel, aluminium and plastic, thereby lowering automobile prices.

The minister said the policy would cover an estimated 5.1 million light motor vehicles (LMVs) that are above 20 years of age and an additional 3.4 million LMVs that are above 15 years. It would also cover 1.7 million medium and heavy motor vehicles that are more than 15 years old, and currently are without valid fitness certificates.

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“This will boost the automobile industry. Scrapping these vehicles will reduce population of old and defective vehicles, {leading to a } 25-30% reduction in vehicular air pollutants and improve road safety,” he said.

“These vehicles are estimated to cause 10-12 times more pollution than the latest vehicles. It would lead to recycling of waste metal, improved safety, reduction in air pollution, reduction in oil imports due to greater fuel efficiency of current vehicles, and stimulate investment,” Gadkari said.

The ministry of road transport and highways, in its draft policy, stated that it would include a waiver of the registration fees and ask states to reduce the road tax on new vehicles purchased by having old ones scrapped in an environment friendly and scientific manner, HT reported last month.

The salient features of the draft policy include raising the registration fee for renewal after completion of 15 years; a higher fee for issue of fitness certificate and fitness testing for commercial vehicles older than 15 years; restrictions by states on the entry of old vehicles in their city limits and higher road tax on cars older than 15 years. Passenger vehicles older than 20 years will invite similar disincentives.

The vehicle scrapping policy has been a longstanding demand of the automobile sector. The apex auto industry body Society of Indian Automobile Manufacturers urged the government to announce an incentive based scrapping policy ahead of the budget, while also seeking a reduction in GST on BS-VI vehicles to 18%.

The Federation of Automobile Dealers Associations (FADA) welcomed the policy.

“FADA is happy to note that the Hon’ble Finance Minister has finally announced the much awaited Scrappage Policy, though voluntary, to phase out old vehicles. If we take 1990 as base year, there are approximately 37 lakh commercial vehicles and 52 lakh private vehicles eligible for voluntarily scrappage...We still need to see the fine print to access the kind of incentives which will be on offer and thus have a positive effect on retail {sales},” said Vinkesh Gulati of FADA..