‘Planning concessions for scrapping vehicles’: Nitin Gadkari

People scrapping their old cars while buying new ones might get tax breaks if the finance ministry agrees to a proposal mooted by the transport ministry, Union minister Nitin Gadkari said on Tuesday.

“The GST (goods and services tax) revenue of both the Centre and the states will rise due to the scrappage policy,” Gadkari said. “I will discuss with the finance ministry on how to provide more (tax-related) concessions under the new vehicle scrappage policy.”

The minister was speaking at the inauguration of Maruti Suzuki Toyotsu India’s first government-approved scrapping and recycling facility for end-of-life vehicles in Noida.

States and Union territories are supposed to provide up to 25% tax rebate on road tax for vehicles bought after scrapping old ones. At the same time, renewing registration certificates of vehicles that are older than 15 years will cost up to eight times more from April 2022.

Scrapping old vehicles is important because a vehicle that is 15 years old releases emissions equivalent to 15 new vehicles, Gadkari said. “The scrapping policy is going to boost automobile sales in India. We are expecting that there will be 10-12% more sales once the policy picks up. It will create at least 200,000 jobs directly or indirectly. Also, availability of low-cost raw materials such as aluminium, rubber, steel, copper and plastic will increase, resulting in reduction in the production cost due to lower imports. This has a potential to reduce the raw material cost by 33%,” he said.

The existing vehicle-scrapping cycle has a low recovery percentage, and several materials are wasted or not properly recycled. The recovery percentage in India is about 70-75%, according to official estimates, while global benchmarks for recovery from scrapped vehicles are in the range of 85-95%.

The scrapping facility in Noida is the second in India, which aims to build 3-4 such facilities in every district of the country, the minister said. Busy districts should have four facilities, while economically backward districts should have at least two centres, he added.

“The turnover of our automobile industry is ₹7.5 lakh crore, of which ₹3 lakh crore is from exports. My target as India’s transport minister is to increase the industry’s turnover to the volume of ₹15 lakh crore within five years, and for that we are encouraging ethanol, flex engine, CNG, LNG, green hydrogen and electric vehicles,” Gadkari said.