Key Facts About Vehicle Scrappage Policy

The Voluntary Vehicle-Fleet Modernization Program (VVMP) is introduced to eliminate 10 to 12 times more polluting vehicles than fit vehicles, which poses a risk to road safety. The policy intends to produce a clean environment by creating an eco-system for phasing out unfit and polluting vehicles.

The development towards formalising the vehicle scrapping industry will increase the availability of low-cost raw materials for the automobile, electronics, and steel industry. The industry will attract an additional investment of around 10,000 crores and create job opportunities.

The criteria to determine the vehicle fitness test shall be as per the Central Motor Vehicles Rules, 1989. 

Key points about the policy are:

  • Commercial use vehicles over 20 years old, and personal use vehicles over 15 years old must undergo fitness tests.
  • The private vehicles that fail to get the fitness certificate will get deregistered. The fees of re-registration will be high after 15 years onwards from the date of registration.
  • The unfit vehicles will be termed as “End of life”, and they will be seized and destroyed.
  • The mandatory testing of heavy commercial vehicles shall tentatively start from 1st April 2023, and for other categories of vehicles, it will start from 1st June 2024 in a phased manner. As a disincentive measure, the fees for fitness test and fitness certificate will be high for commercial vehicles after 15 years onwards from the date of registration. 
  • The vehicles over 15 years old that governments and government-backed entities own may be mandatorily scrapped without any fitness test. There are 2.37 lakh such vehicles. The tentative timeline for starting the scrapping of such vehicles shall be from 1st April 2022.

The government will encourage a Registered Vehicle Scrapping Facility (RVSF) across the country through public and private participation. It is planned to set up Integrated Scrapping Facilities across India to synergise different scrapping technologies together. 

Further, the Ministry of Road Transport and Highways will encourage installing Automated Fitness Centres through the PPP model. It is planned to have no human intervention in the testing process. 

The scrapping of old vehicles through registered scrapping centres will provide incentives to the owners of the vehicle as below:

  • Scrapping certificate: The vehicle owners shall be given the scrapping certificate to incentivise them to purchase new vehicles.
  • Scrap value: The vehicle’s scrap value will be around 4%-6% of the new vehicle’s ex-showroom price.
  • Road-tax rebate: The state governments are advised to offer a road-tax rebate of up to 25% for private vehicles and 15% for commercial vehicles.
  • Discount on a new vehicle: The vehicle manufacturers are advised to provide a discount of 5% upon the scrapping certificate on the purchase of a new vehicle.
  • Waiver of registration fees: The registration fees for new vehicles may be waived against the scrapping certificate.

The scrapping policy idea is adopted from the comparative study of standards followed by various countries like Germany, the UK, the USA and Japan. Hence, the scrappage policy benefits by increasing vehicles’ population with better fuel efficiency and reduced pollution. It will fulfil the country’s climate commitments through clean air. 

For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in

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