DNA Explainer: National Vehicle Scrappage Policy - What can car and bike owners expect?

The much-awaited National Automobile Scrappage Policy is finally here. On Friday, Prime Minister Narendra Modi launched the vehicle scrappage policy during the Investor Summit held in Gandhinagar, Gujarat. PM Modi pointed out that the new policy would help in phasing out the unfit and polluting vehicles and at the same time help the economy grow.

Narendra Modi urged the youth and start-ups to join this program. The Prime Minister said that the policy would be beneficial to the auto sector in India. "Modernity in mobility not only reduces the burden of travel and transportation but also proves helpful for economic development," PM Modi said during the launch.

Even as technology in every sector is fast-changing, including the automobile sector, the scrappage policy aims at phasing out old and unfit vehicles and modernise the vehicle fleet in the country. "Amid these changes, it is also important to protect our environment, our land, our resources, our raw material," PM Modi observed.

Mandatory fitness testing of commercial vehicles is likely to start from April 1, 2023, while for personal vehicles it is expected to begin from June 1, 2024, in a phased manner.

What is Vehicle Scrappage Policy?

The National Vehicle Scrappage Policy is an official declaration by the government regarding the rules and regulations to be followed while scrapping a vehicle in India.

Developed countries already have a detailed policy in this regard. However, India did not have an official policy on vehicle scrappage till now.

As per the National Vehicle Scrappage Policy old and unfit vehicles whose life cycle is complete shall be scrapped.

This will be a voluntary process but defined by rules. For instance, vehicles that are 15-20 years old need not be scrapped compulsorily.

However, they will have to undergo a fitness test after a defined period. Failing the test would most likely lead to vehicle scrappage.

Key highlights of Vehicle Scrappage Policy

The owner of an old vehicle will receive the scrap value which is around 4-6% of the ex-showroom price of the new vehicle they buy.

The scheme will provide incentives to the owners of the old vehicles to scrap their unfit vehicles through registered scrapping centres.

As per the policy, automobile manufacturers will provide a discount of 5% on the purchase of a new vehicle against the scrapping certificate.

The new policy also advises offering a road-tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles.

The new vehicle policy proposes private vehicles be de-registered after 20 years if found unfit or if it fails to renew registration certificate.

The registration fees may also be waived for the purchase of a new vehicle against the scrapping certificate.

Benefits of the Vehicle Scrappage Policy

The benefits of the new vehicle scrap policy will be for the economy, automobile sector, vehicle owners, and others.

Scrapping unfit vehicles will result in less air pollution and carbon emission and provide better air quality.

With old vehicles being scrapped, the demand for new vehicles will rise as the old ones will need to be replaced by new ones.

For the already distressed automobile sector, it will benefit from the new scrappage policy leading to more job opportunities and more sales. 

New advanced vehicles will be comparatively safer. For example, new cars come with superior safety features.

The recycling industry will also be more active leading to higher revenue.

Vehicle owners might receive tax benefits as an incentive to scrap an old vehicle.

Vehicle owners might also get the best price for car scrappage for workable parts such as tyres.