New Delhi: Union Minister Nitin Gadkari, on Thursday, announced the long-awaited vehicle scrappage policy in the Lok Sabha. According to the minister, rules for fitness tests and scrapping centres are to be applicable from October 1, 2021. But the scrapping of government and PSU vehicles which are older than 15 years are to come into effect from April 1, 2022.
The mandatory fitness testing for heavy commercial vehicles is to be in force from April 1, 2023, and the same will be in place in a phased manner for other categories from June 1, 2024.
In case of failure to get a fitness certificate, commercial vehicles will be de-registered after 15 years. Private vehicles will be de-registered after 20 years if found unfit or in case of failure to renew registration certificates, the Minister said. A vehicle failing the fitness test or failing to get a renewal of its registration certificate is to be declared as ‘End of Life Vehicle’, Gadkari added.
On the financial incentives side, the scrap value for the old vehicle to be given by the scrapping centre will be approximately 4%-6% of ex-showroom price of a new vehicle, the Minister said. He also advised OEMs to provide a 5% discount on the purchase of a new vehicle against the scrapping certificate. Furthermore, the state governments are advised to offer a road tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles.
The new policy, formally announced by Finance Minister Nirmala Sitharaman in the Union Budget 2021, will provide a much-needed relief to the Indian automobile industry which has been facing multiple regulatory challenges since 2 to 3 years.
Corporate expectations
Hailing the new policy, the auto industry apex body, the Society of Indian Automobile Manufacturers (SIAM), said it will work with the government towards creating the infrastructure for vehicle testing as well as scrappage centres all over the country. “The most important step is to build an infrastructure of testing and scrapping centres fast all over the country and SIAM will work on this front with the government,” SIAM said.
The Federation of Automobile Dealers Associations (FADA) president Vinkesh Gulati said the guidelines and advice announced on Thursday are in the right direction. Now the state governments and OEMs have to do their part to make it a success.
“The Indian automobile industry has already upgraded to one of the most advanced emission standards. While the new vehicles will be least polluting, vehicles that are older create enormous pollution with the least safety standards. They are now eligible for scrappage thus making roads safer and air cleaner,” he said.
He further said that the incentives will motivate customers to scrap old vehicles adding that the new policy will revive the ailing CV segment and in turn will boost the State revenue from the sale of new vehicles.
The new vehicle scrapping policy can help in three ways: one, it lowers the cost of passenger vehicles by 8%-10% for most segments; two, makes affordable replacement of older, more-polluting passenger vehicles; and three, increases the availability of key raw materials such as steel, copper and aluminium, which can be recycled to lower the cost of production of the new vehicles.Anuj Sethi, senior director, CRISIL Ratings
Tata Motors sees the new scrappage policy as a demand stirrer. “The proposed scrappage policy is a welcome move and a step in the right direction to promote safer and cleaner vehicles in India. Largely, it addresses intents of all the stakeholders from low import bill for scrap and crude oil, job opportunities for MSMEs, possibility of rise in new vehicle sales for OEMs, low operation cost for vehicle owners, safer and cleaner vehicle for consumers and a sustainable environment for all,” the company said in a statement.
According to Anuj Sethi, senior director, CRISIL Ratings, the policy will not only increase the availability of raw materials but also bring down the cost of cars. “The new vehicle scrapping policy can help in three ways: one, it lowers the cost of passenger vehicles by 8%-10% for most segments; two, makes affordable replacement of older, more-polluting passenger vehicles; and three, increases the availability of key raw materials such as steel, copper and aluminium, which can be recycled to lower the cost of production of the new vehicles,” he noted.
Another rating agency CARE Ratings said “The headwinds for implementation would be in the form of having more infrastructure in place to build organised scrapping centres, which currently India does not possess.”
However, proper implementation of this policy is pivotal for its success, which may help India gain competitive position globally and be among the leading automobile manufacturing hubs, the firm added.
