What does the New Voluntary Vehicle Scrappage Policy behold for the future in India?

By Satyaki Paul

                On August 18, 2021 the Union Minister for Road Transport and Highways Shri Nitin Gadkari has publicized India’s Vehicle Scrappage Policy orthe “Voluntary Vehicle-Fleet Modernisation Programme”.The proposed timeline for this policy is 2023-24.

                The programme shall seek to encourage the scrapping of old vehicles. The Union Government opined that the scheme will help boost economic growth by increasing demand for automobiles by as much as 30% in current context.

                The objectives of the India’s New Vehicle Scrappage Policy or the “Voluntary Vehicle-Fleet Modernisation Programme” are:

1. To reduce population of old and defective vehicles in a phased manner;
2. Achieve reduction in vehicular air pollutants to fulfil India’s climate commitments;
3. Improve road and vehicular safety;
4. Achieve better fuel efficiency;
5. Formalize the currently informal vehicle scrapping industry; and
6. Boost availability of low-cost raw materials for automotive, steel and electronics industry.

                To aid in such aforementioned objectives, the Union Government has proposed numerous measures in policy. These are:

1. De-registration of Commercial Vehicles: after 15 years in case of failure to get the fitnesscertificate.The disincentive measure is comprised of increased fees for fitness certificate and fitness test may be applicable forcommercial vehicles 15 year onwards from the date of initial registration.
2. De-registration of Private Vehicles: after 20 years if found unfit or in case of a failure to renewregistration certificate.The disincentive measure is comprised of increased re-registration fees will be applicable for private vehicles 15 yearonwards from the date of initial registration.
3. De-registration or scrappage of Government Vehicles: after 15 years of usage—it is beingproposed that all vehicles of the Central Government, State Government, Municipal Corporation,Panchayats, State Transport Undertakings, Public Sector Undertakings and autonomous bodies withthe Union and State Governments may be de-registered and scrapped after 15 years from the dateof registration.
4. Introduction of Scrapping Certificate: The scheme shall provide robust incentives to owners of old vehicles toscrap old and incapable vehicles through registered scrapping centres, which shall provide the ownerswith a scrapping certificate.

                Among all these proposed measures, the Scrapping Certificate would be a multifaceted component wherein the Scrappage Certificate would aid in down payment i.e., scrap Value for the old vehicle given by the scrapping centre, which isapproximately 4-6% of ex-showroom price of a new vehicle. Furthermore, tax Rebate will be given by the state governments may be advised to offer a road- tax rebate of up to 25% for personalvehicles and up to 15% for commercial vehicles. Thus, the Scrapping Certificate would provide a certain boost for creation of a circular economy.                 In conclusion, the new policy would upsurge the sale of new cars and trucks which in turn would boost our Indian economy due to the incentives offered by both the Union and State governments. Nevertheless, there are numerous challenges that are likely to crop up during the implementation of the new policy. The success of the programme will depend primarily on the incentives that government officials themselves have to set up new testing centres and to uphold safety and pollution standards i.e., Registered Vehicle Scrapping Facility (RVSF). These facilities will be different from the common private scrap dealers who have a direct financial incentive to set up the necessary infrastructure, government bureaucrats do not have such strong incentive.Additionally, the new safety and environmental standards, by reducing the effective life of a vehicle, such policy may also affect buyer decisions due to low consumer confidence.