Motor Vehicle Scrappage Policy: 7 Points You Need To Know

Announcing the Draft of the Motor Vehicle Scrappage Policy, MoRTH has drafted to prohibit unfit vehicles, or vehicles older than 20 years. India has 51 lakh Light Motor Vehicles that are older than 20 years and 34 lakh Light Motor Vehicles that are older than 15 years. Around 17 lakh Medium and Heavy Commercial Vehicles are older than 15 years without a valid fitness certificate. Older vehicles pollute the environment 10 to 12 times more than fit vehicles. They also pose a risk to road safety, stated the ministry. With the announcement, the Indian automobile industry will likely get a boost and also positively affect the environment. The draft focuses majorly on the fitness of the vehicle, more than the age.

Further, the MoRTH has invited comments on the draft till April 14 to the Ministry. Minister RTH, Nitin Gadkari in the Lok Sabha on Thursday announced the policy will come out in phases starting October 1, 2021. It will be fully implemented by the second half of 2024. For reference, scrapping of the vehicle will mean the entire process from receipt and record of the vehicle including depolluting, dismantling, segregation of material, safe disposal of non-reusable parts. The government will also issue a Certificate of Vehicle Scrapping to the registered owner of the motor vehicle. Read the draft of the Motor Vehicle Scrapping Policy in Hindi or English.

The move, in its initial stages, has received a phenomenal response from the industry. But the catch is, it does not only affect the automobile industry, but also the end consumer. From a wider point of view, here is everything you need to know about the motor vehicle scrappage policy.

7 Key Points you need to know about the Vehicle Scrappage Policy

1. Fitness Certificate

Under the new Scrappage Policy, all personal vehicles will have to undergo a mandatory fitness test after 20 years. After they pass the test, they can ply on the roads. On the other hand, all commercial vehicles will have to pass the test after the completion of 15 years. On failure to obtain the fitness certificate, the vehicle will have to be scrapped calling it an ‘end of life vehicle’. Further, if the vehicle owner renews the fitness and registration certificate, the vehicles can run on the roads even after the given number of years. However, increased fitness fees and re-registration charges would act as a deterrent for an owner to retain an old vehicle.

2. Incentives on Vehicle Scrapping

Some of the incentives in the scrappage policy include scrap value for the old vehicle given by the scrapping centre, which is approximately 4-6% of the ex-showroom price of a new vehicle; the state governments offer a road-tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles; the vehicle manufacturers may provide a discount of 5% on the purchase of new vehicle against the scrapping certificate; the registration fees may also be waived for the purchase of new vehicle against the scrapping certificate.

Also, there are disincentives and penalties for non-compliance. These include a hike in registration and fitness certificate renewal fees, stiff penalties for delay in renewals, green tax by states, and, of course, mandatory automated fitness test and de-registration for the old vehicles failing to pass the mandatory fitness test.

3. A boost to the environment

The objectives of the policy, as stated by Nitin Gadkari, aim to reduce the population of old and defective vehicles. It further aims to achieve a reduction in vehicular air pollutants to fulfil India’s climate commitments. The policy will improve road and vehicular safety, achieve better fuel efficiency, formalize the currently informal vehicle scrapping industry. Thus, it will boost the availability of low-cost raw materials for the automotive, steel and electronics industry.

MoRTH is introducing the Voluntary Vehicle-Fleet Modernization Programme or “Vehicle Scrapping Policy” in the interest of a clean environment with rider & pedestrian safety. It is aimed at creating an eco-System for phasing out of unfit & polluting vehicles.

— MORTHINDIA (@MORTHIndia) March 18, 2021

4. A boost to the EV Industry

While the scrappage policy aims to reduce vehicular pollution and bring in more fuel-efficient vehicles, it directly points out that the country is aiming to incentivise Electric Vehicular use. The policy is also a clear case of killing two birds with one stone. On one hand, the government promotes the scrapping of old vehicles for the environment, and secondly, they promote companies like Tesla to enter the automobile market with their flagship EV products.

5. Benefits to the Automobile industry

The Ministry of Road Transport and Highways will promote the setting up of a Registered Vehicle Scrapping Facility (RVSF) across India. It will also encourage public and private participation in opening up such centres. Thus, the ecosystem will attract approximately additional investments of around Rs 10,000 Crore and 35,000 job opportunities. The ministry has also stated that it will provide the draft notifications to better understand the scrappage policy.

Tata Motors has welcomed the Motor Vehicle Scrappage Policy. The company states that it is a step in the right direction to promote safer and cleaner vehicles in India. “Provisions in the policy such as compulsory fitness certificate, dis-incentivizing re-registration of commercial vehicles after 15 years and private vehicle after 20 years, would encourage the removal of old and polluting vehicles from the system. Largely, it addresses intents of all the stakeholders; including low import bill for scrap and crude oil, job opportunities for MSMEs, the possibility of upside 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 spokesperson for Tata Motors said.

“We are optimistic and look forward to seeing how various provisions of this policy encourage consumers to voluntarily come forward and scrap their old and unfit vehicles. We will await the actual release of the policy to go through the fine print and the nuances, to understand its impact on the industry, at large and work closely with all stakeholders, towards the larger objective of the policy, set by the Government,” the spokesperson further added.

6. What vehicles will be scrapped?

According to the rules, the following vehicles may be offered for scrapping to the Registered Scrapper:

• Vehicles that have not renewed their Certificate of Registration under Rule 52 of the CMVR, 1989.
• Vehicles that do not have a certificate of fitness under Section 62 of the Motor Vehicles Act, 1988.
•  Those, damaged due to fire, riot, natural disaster, accident or any calamity; after which the registered owner self certifies the same as scrap.
• Vehicles that have been declared obsolete or surplus or beyond economic repair by the Central/State Organizations of the government.
• Vehicles bought by any agency including RVSF in an auction for scrapping the vehicles.
• Those that have outlived their utility or application particularly for projects in mining, highways, power, farms etc. as may be self-certified by the owner.
• Manufacturing rejects and tests vehicles as may be certified by the Vehicle OEM.
• Auctioned, impounded and abandoned vehicles by any Enforcement Agency

7. Tentative Timeline

• Rules for Fitness Tests and Scrapping Centres: October 1, 2021
• The Scrapping of Government and PSU vehicles above 15 years of age: April 1, 2022
• Mandatory Fitness Testing for Heavy Commercial Vehicles: April 1, 2023
• Mandatory Fitness Testing (Phased manner for other categories): June 1, 2024