PM Modi unveils scrappage policy for automobiles

New Delhi: Prime Minister Narendra Modi on Friday launched the automobile scrappage policy to promote a circular economy and make the process of economic development more sustainable and environment-friendly.

During his virtual address at the Investor Summit in Gujarat, the Prime Minister said the vehicle scrappage policy will bring in investments of around Rs 10,000 crore, create thousands of jobs and reduce pollution in cities.

"The policy, aimed at recycling old and unfit vehicles, will give new identity to India's mobility and auto sector," PM Modi said in his address while virtually launching the initiative during 'Investors Summit' organised in Gandhinagar.

"This policy will play a major role in removing unfit vehicles from our roads in a scientific manner. It will modernise the vehicular population on our city roads," he added.

Under this policy, people who give their old vehicle for turning it into scrap will be given a certificate by the government. People having this certificate will not be charged any registration fee on the purchase of a new vehicle, said PM Modi, adding that such vehicle owners will also be entitled for some rebate on road tax.

Highlighting a key feature of the policy, PM Modi said that instead of the age of the vehicle, a fitness test will determine if the vehicle will be sent for scrapping.

"We imported scrap steel worth ₹ 23,000 crore last year because recovery of metals in our country is not enough. With this policy, we can now recover even rare earth metals in a scientific manner. We have to reduce our dependence on imports. For that, the industry needs to put in some extra efforts,” he said.

He also said that Alang in Gujarat can become a hub for vehicle scrapping.

Union minister for road transport & highways Nitin Gadkari said the scrappage policy would likely lead to a cut in raw material costs by around 40 per cent and help India become an industrial hub of automobile manufacturing.

He also said that testing centers will be set up in all districts across the country using the public private partnership (PPP) model.

Mr Gadkari said with increased sales of automobiles due to the launch of the vehicle scrappage policy, the government will get a profit of Rs 30,000-40,000 crore in GST, as per an estimate.

“Around 99 per cent of recovery (metal waste) can be done with regular scrapping. It will also bring down the cost of raw material by approximately 40 per cent. It will make components less expensive and increase our competitiveness in the international market,” the minister pointed out.

The policy is aimed at incentivizing owners of old and polluting vehicles to take them off the road. Commercial vehicles that are over 15 years old and personal vehicles that are more than 20 years old will be eligible for scrapping.

Personal vehicles older than 20 years and commercial vehicles older than 15 years will have to undergo a fitness test at government registered ‘automated fitness centres’.

Vehicles that fail to pass the test will be declared as ‘end-of-life vehicles’, which would mean that the vehicle would have to be recycled. This will pave the way for older vehicles to be scrapped. In case the vehicles pass the test, the owners will have to pay a hefty fee for re-registration.

According to the new policy, the re-registration fee would be hiked to around eight times for personal vehicles, and around 20 times for commercial vehicles.

In case you decide to scrap your old vehicle at the registered scrapping centres, you will get approximately 4-6 per cent of the value of the vehicle’s ex-showroom price. The ex-showroom price is the cost of the vehicle, excluding the charges paid for registering the vehicle at RTO and insurance.

Moreover, if you buy a new vehicle you will be given a flat 5 per cent discount on presenting a scrapping certificate. Registration fees will also be waived on the purchase of a new vehicle.

The policy will be first implemented for government-owned vehicles, and then for heavy commercial and personal vehicles, Giridhar Aramane, secretary in the road transport and highways ministry said in a separate statement.

“We propose to scrap vehicles, which are 15 years and over, owned by the Central and state governments by April 2022,” Mr Aramane said.

“From 2023 onwards, heavy commercial vehicles need to be scrapped if they do not conform to the fitness level prescribed under the rules. For personal vehicles, we plan to implement this from June 2024 onwards,” he said.