All vehicles owned by central and state governments, including buses owned by transport corporations and public sector undertakings, that are older than 15 years will be de-registered and scrapped starting April 1.
This has been announced by the Ministry of Road Transport & Highways (MoRTH) through a notification.
Vehicle Scrappage Policy, 2021
As per the notification, disposal of such vehicles should be ensured through the Registered Vehicle Scrapping Facility after the expiry of the fifteen years from the date of initial registration of the vehicle.
Announced in the Union Budget 2021-22, the policy provides for fitness tests after 20 years for personal vehicles, while commercial vehicles will require it after 15 years.
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 MoRTH saying the automated tests will place emphasis on vehicle fitness, and not its age.
Exemptions: The rules, however, shall not apply to the special purpose vehicles, which include armoured and other specialised vehicles used for operational purposes for the defence of the country and for the maintenance of law and order and internal security.
Disincentives: As a disincentive, increased re-registration fees would be applicable for vehicles 15 years or older from the initial date registration.
Why need such a policy?
Clean mobility: More than one crore of 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.
Emission control: The mere implementation of BS6 norms won’t help in the reduction of the pollution being caused by the already inefficient vehicles on the roads.
Benefits for a vehicle owner
Rebate offer: States and Union Territories will provide up to 25% tax rebate on road tax for vehicles that are purchased after scrapping old vehicles.
Discount on new purchase: 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.
Considerate savings: 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).
Significance of scrappage policy
Investment and Employment: The policy will attract investment of over Rs 10,000 crore, and generate 50,000 jobs in the country.
Scrap yard economics: 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, and 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.
Steel sector boost: Most steel-producing countries are trying to bring down emissions by shifting from iron-ore-based production to scrap-based production.
Emission control: As older vehicles pollute the environment 10 to 12 times more, and estimated that 17 lakh medium and heavy commercial vehicles are more than 15 years old.
Issues with the scrappage policy
Lack of scrappage infrastructure: Scrapping in India is highly unorganized. We have a perfect example of ships scrappage where it is not largely mechanized.
Advisory nature: This policy has only ‘advised’ the state governments and the automobile industry to provide voluntary incentives to the owners of old vehicles.
No initial incentivization: The central government has not committed to make it a fiscal stimulus strategy for quicker renewal of ageing, heavy-duty vehicle fleet with BS-VI vehicles — or to link other segments with targeted electrification.
Fleet renewal: The focus on targeted fleet renewal for maximum emissions gains is still weak.
Burden on States: The proposed policy puts the entire onus of incentivizing on the state governments. They have been advised to waive off a big chunk of road tax and registration fees on replacement vehicles.
Expected revenue loss: These are important sources of state revenue, and the reaction of the state governments is still not known.
What can be an effective strategy?
(1) For Transportation vehicles
More nuanced approach: Consider that some truck owners may want to only dispose of the very old trucks without replacing them. But others may want to scrap and replace the older trucks.
Targeting end-of-life vehicles: In that case, a rebate can be given to the owners of end-of-life vehicles who are interested in ‘only scrapping’ the vehicle without immediately replacing them.
(2) For Personal vehicles
EV boost: For them, the central incentive can be linked with the replacement with electric vehicles.
(3)Build-in manufacturers’ responsibility
Mandatory recyclability: The new policy also needs to align with the mandate for the manufacturers to meet targets for the recyclability of material. Make this mandatory as part of the scrappage policy.
(4) Implementing AIS 129 standard
It is encouraging that the Automotive Industrial Standard-129 (AIS 129) on reuse, recycling and material recovery from vehicles were framed in 2015.
This requires 80-85 per cent of the material used in vehicle manufacturing by mass to be recoverable/recyclable/reusable at the end of life.
Way forward
Safe disposal of scrappage: This first-ever formal scrappage policy in India is urgently needed to help build infrastructure for safe disposal and material recovery to minimise environmental hazards.
Proper incentivization: It is necessary to leverage this targeted fleet renewal with well-designed central support for a post-pandemic green deal.
