The launch of India’s vehicle scrapping policy or the Voluntary Vehicle-Fleet Modernization Programme (VVMP) seeks to usher in a new age of what it means to own and use an automobile in India.

Vehicle Scrappage Policy: Key Features

• Fitness testing: The government plans to set up between 450-500 automated vehicle fitness testing stations across India on a PPP basis. Private vehicles – which are over 20 years old – will have to undergo fitness tests, at an estimated cost of Rs 300-400 per test.
• Scrappage: A total of 60-70 vehicle scrapping centers will also be built, situated no further than 150-200 kilometers away from any location in India.
• Green Tax: Vehicles that pass the automated tests will be subjected to a ‘green tax’, which will see owners shell out an additional 10 percent to 25 percent of road tax at the time of the renewal of the vehicle’s fitness certificate, along with re-registration fees.
• Penalties: Those who choose to drive a vehicle that has failed the automated test will face substantial penalties, and such vehicles could also be impounded.
• Choice of owners: The scrappage policy leaves the choice of scrapping to the owner of the vehicle, with Gadkari saying the automated tests will place emphasis on vehicle fitness, and not its age.

Implementation plan

• The implementation of the vehicle scrappage policy in India is still some time away.
• Initially, it will be heavy commercial vehicles that will need to undergo fitness tests starting 1 April, 2023.
• Fitness tests will be made mandatory for all other types of vehicles from 1 June, 2024, in a phased manner.

Why need such policy?

• Clean mobility: More than one crore vehicles on India’s roads contribute greatly to rising pollution levels, as well as their tendency to be less fuel-efficient towards the end of their life.
• Reducing oil import: The promotion of clean mobility necessitates a reduction in the country’s fuel import bills, and a reduction in emissions is a pressing need at this time.
• Road safety: Such vehicles are also inherently unsafe and can be a threat to their occupants as well as other road users.
• Consumer benefits: Scrapping an old vehicle and replacing it with a new one will bring substantial monetary benefits for motorists, in addition to reducing emissions and enhancing fuel efficiency.

Benefits for a vehicle owner

• Once the vehicle has been scrapped, the owner will receive anywhere between four to six percent of their old vehicle’s ex-showroom price, and a scrappage certificate.
• This will make the individual eligible for a road tax rebate of 25 percent, a registration fee waiver and a discount of five percent of a new vehicle’s ex-showroom cost, offered by the vehicle manufacturer.
• This will essentially make a new vehicle cheaper for someone who has scrapped their old vehicle, with potential discounts in the range of Rs 30,000 (for a car costing Rs 6 lakh) to Rs 50,000 (for a car costing Rs 10 lakh).

What are the other positives?

• Investment and Employment: The policy will attract investment of over Rs 10,000 crore, and generate 50,000 jobs in the country.
• Recycling: Proper recycling of raw materials obtained from the scrapping will help reduce the import of materials such as aluminium, copper, steel and more.
• Vehicle price control: With the potential to recycle up to 99 percent of materials used in a vehicle, raw material costs are estimated to drop by as much as 40 percent.
• Transition to EVs: There’s also a possibility to derive materials needed for local production of lithium-ion batteries from scrapping older vehicles, which could help drive the growth of the EV business.
• Circular Economy: A circular economy depends on reuse, sharing, repair, refurbishment, remanufacturing and recycling of resources to create a closed-loop system, minimizing the use of resources, generation of waste, pollution and carbon emissions.
• Demand boost: Globally, a scrappage policy has been followed by a boost in demand in the auto manufacturing sector, especially in Europe and the US.

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