Economy, UncategorizedMarch 26, 2021August 6, 2021

Vehicle Scrappage Policy

There’s been a lot of buzz around the vehicle scrappage policy. We have been expecting this for a long time now. And finally, the elephant in the room was addressed on Mar 18, 2021, by our Finance Minister Nirmala Sitharaman in her Budget Speech.

Let us take a dive into what the policy entails.

Why is it needed in the first place?

Similar to any machine, vehicles wear out with time. They become less efficient and more polluting. What’s more, they take up way too much fuel than a new vehicle and increase our oil imports to supplement their humongous needs.

In addition to tarnishing the environment and increasing our imports, these old vehicles stall the purchase of newer models. This policy came as a boon to the automobile sector that had been buckling under the pandemic.

The Policy

The Vehicle Scrappage Policy gives out separate rules for Private and Commercial Vehicles. Simply put, private vehicles include your vehicles at home. You do not use them for any commercial purposes. On the other hand, commercial vehicles include the usual taxi/cab that charges you for your transport.

The premise is that you can use your old vehicle as long as they are fit and healthy enough to run. There are “Automated Fitness Centres” to ensure that these vehicles are qualified or not for road-life. Around 720 Automated fitness centres are expected, and the vehicle’s emission, braking, and safety components will also be put to the test. You can book appointments for fitness centres online.

Commercial vehicles are mandated to get a fitness certificate after 15 years of registration, while for private vehicles, the time period is 20 years. If vehicles fail to pass the test, they will be de-registered and be categorized as ‘end-of-life’ vehicles.

This automatically leads to two outcomes. You fail the test; you can bid adieu to your old friend and head to a new showroom. It’s a win for the automobile industry and the environment. But if you pass the test, you get to keep your vehicle, but it comes at a considerable expense. Vehicles that pass the test are required to re-register. And the re-registration fee is quite hefty. The hike is estimated to be eight-fold for personal vehicles and twenty-fold for commercial ones.

Government vehicles will be automatically scrapped after 15 years of registration. Note that the Vehicle Scrappage policy does not apply to vintage cars.

Either way, if you pass or fail the test, you have to shell out money. So is it a lose-lose for customers? Not really. It seems like the Government is giving financial incentives if you step up.

Benefits for buyers

In case you decide to scrap your old vehicle, there are several benefits you can avail of. To add on, you can scrap them anywhere in India irrespective of the place of registration.

On scrapping your vehicle at the registered scrapping centres, you get 4-6% of the vehicle’s ex-showroom price value. Basically, the ex-showroom price is the vehicle cost, excluding registration cost at RTO and insurance.
These scrapping centres are registered with the Government through the Vahan database of the Transport ministry. You will be provided with a Scrapping certificate on scrapping the vehicle at these centres.
On showing these Scrapping Certificates, you will be awarded a flat 5% discount on purchasing a new vehicle.
The cherry on the cake is that Registration fees will also be waived to purchase a new vehicle.

Timeline

A tentative timeline has been decided for the new policy:

Oct 1, 2021: Rules for fitness tests and government scrapping centres will come into effect.
Apr 1, 2022: The scrapping of government and PSU vehicles above 15 years of age will start.
Apr 1, 2023: Fitness testing for heavy commercial vehicles.

Overall, we hope the Vehicle Scrappage Policy will be a respite to the Automobile sector and help India become an Automobile Hub. The environment can hopefully take a breath of fresh air, and as for us, we can pick up car catalogues and head off to the nearest showroom 🙂