Consumers looking to benefit from the vehicle scrappage incentive scheme will have to wait for another two to three years as the policy will first be implemented for government-owned vehicles.
New scrappage yards and testing facilities to check the roadworthiness of vehicles will have to be set up before the scheme can include personal vehicles.
“We propose to scrap vehicles, which are 15 years and over, owned by the Central and state governments by April 2022,” said Giridhar Aramane, secretary in the road transport and highways ministry. “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, we plan to implement this from June 2024 onwards.”
The policy, in the works since 2015, is aimed at providing incentives to owners of old and polluting vehicles to take them off the road and scrap them. Commercial vehicles that are over 15 years old and personal vehicles that are over 20 years old will become eligible for scrapping.
According to the ministry’s calculations, the benefits from scrapping an over 15-year-old Maruti Suzuki Swift Dzire and replacing it with a new car can add up to Rs 115,000.
From the existing value of Rs 15,000 per vehicle, the scrap value can shoot up to Rs 40,000, as per Aramane. The scrap value of a vehicle can be in the range of 4-6 percent of the ex-showroom price.
Incentives for the scheme include a road tax rebate of up to 25 percent for passenger vehicles and 15 percent for commercial vehicles, a 5 percent discount from automobile manufacturers on buying new vehicles, and a waiver of registration fees.
“We have come up with a policy wherein the road tax will be reduced by the state government by up to 25 percent. We have also waived the registration fees; the association of automobile manufacturers is also going to offer some discount on purchase of new vehicles and the certificate of deposit for the scrapped vehicles,” Aramane said.
According to the ministry’s database, about 10 million vehicles don’t have fitness certificates. The owners of many such vehicles have not even re-registered them, which is mandatory, and this means that they are either plying on the road illegally or have been abandoned. After 20 years, a vehicle has to be re-registered, as per norms.
Scrapyards and fitness centres
Unlike in developed countries, India’s vehicle scrapping industry is highly unorganised and controlled mostly by roadside garage owners. The scrapping process is labour-intensive and largely done manually.
“The scrapping facilities are highly unorganised, located in major cities, who buy the vehicle and do the dismantling manually without any machinery, which makes the process inefficient. So, the recycling, recovery and reuse from the scrapped vehicles is very limited, which causes serious economic loss,” Aramane said.
The ministry hopes the scrapping scheme will help address the dearth in availability of key raw materials like rare earths and metals. About 60 vehicle scrappage centres will be set up by the private sector with help from state governments.
“We want to modernise this process through a modern automated scraping centre where vehicles will be deregistered before scrapping with the help of RTOs (regional transport offices), component by component, which can generate better value. This will reduce raw material costs, increase availability of raw materials such as rare earths and other metals,” Aramane added.
The government expects to generate employment for about 35,000 people at vehicle fitness centres and scrapyards and a collective investment of Rs 10,000 crore. The vehicle fitness test cost will depend on the type of vehicle. For a personal vehicle, it will cost Rs 300-400, while for a commercial vehicle it could be Rs 1,000-1,500.
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