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Vehicle Scrappage Policy: A Plan With Wide Objectives

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Vehicles scrappage policy.

India’s Voluntary Vehicle-Fleet Modernization Programme, popularly known as vehicle scrappage policy was recently launched by honorable Prime Minister Shri Narendra Modi at an investors summit in Gujarat. According to the PM, this new policy is going to promote a circular economy and will be boosting the auto sector. The policy aims to lower pollution, create jobs and boost up the demand for new vehicles. According to this policy, old, unfit, and polluting vehicles will be scrapped after creating an infrastructure where automated testing of vehicles will be done after the vehicle has completed its registration period. 

Incentives given by the government for scrapping old ones and buying a new vehicle are –

  • Zero registration fees for new vehicles. 
  • Scrap value will be given to owners which will be equivalent to 4-6 % of the ex-showroom price of the new vehicle.
  • Concessions up to 25% for non-transport vehicles and up to 15% for transport vehicles will be given by the state government on motor vehicle tax.
  • Vehicles manufacturer can give discount up to 5% for buying a new one.

Disincentives for using the old vehicle –

  • An additional green tax may be levied by the state.
  • Increase in the renewal registration fee for private vehicles.
  • Increase in fitness certification fee for commercial vehicles.
  • Unfit vehicles will be automatically deregistered.

Again certain vehicles are exempted from these which include electric vehicles and strong hybrid vehicles, vehicles that are running on fuels such as CNG, ethanol, and LPG, vehicles used in farms and agriculture such as Tractors and harvesters. Moreover this vehicle scrappage policy is said to be one of the parts of the stimulus package which was requested majorly by the Original Equipment Manufacturers (OEMs) to infuse their demand.

According to THE MOTOR VEHICLES ACT, 1988 Subject to the provisions of sections 59 and 60, a transport vehicle shall not be deemed to be validly registered for section 39, unless it carries a certificate of fitness in such form containing such particulars and information as may be prescribed by the Central Government, issued by the prescribed authority, or by an authorized testing station mentioned in sub-section (2), to the effect that the vehicle complies for the time being with all the requirements of this Act and the Rules made thereunder. This means a fitness certificate is a must for every vehicle Also central Government has the power to fix the age limit of a motor vehicle under this act which says that government can specify the life of a motor vehicle reckoned from the date of its manufacture, after the expiry of which the motor vehicle shall not be deemed to comply with the requirements of this Act and the Rules made thereunder.


Expectations and Significance

These automobiles use outdated technologies and are therefore less efficient than newer vehicles. This implies that older vehicles harm the environment, consume more fuel, and are hazardous to operate. This policy will also reduce the fuel consumption of a citizen and the country as a whole. It is unlikely that the energy needs of a developing country likely India will move away from fossil fuels in the near future. With over 80% of the country’s oil need being fulfilled by other nations, it not only poses a great threat to the energy security of the country but also acts as a great expenditure to the economy. So, these kinds of policies which result in a reduction in the country’s fuel import bills should be promoted.

It’s also one of the most recent additions to the list of circular economy projects. A circular economy is based on resource reuse, sharing, repair, refurbishment, remanufacturing, and recycling to form a closed-loop system that reduces resource consumption, waste output, pollution, and carbon emissions. The policy aims to make it easier to recover materials used in automobiles, such as steel, aluminum, and plastic, by utilizing a scientific scrapping process that can subsequently be reused in a variety of industries, including auto production. Once there are enough registered vehicle scrapping facilities around the country, the cost of these critical inputs is projected to drop. With the potential to recycle up to 99 percent of materials used in a vehicle, raw material costs are estimated to drop by as much as 40 percent.

Under the vehicle scrappage policy, testing and scrappage centers will be set up in all districts across the country using the public-private partnership (PPP) model.  The policymakers are proposing that 70- 100 fitness testing centers be set up all over the country. According to the government, it will attract investment of over Rs 10,000 crore, and generate 50,000 jobs in the country.

The biggest benefit of this policy is the boost it will provide to the automobile industry of India. Having endured and managed to recover from the disruptions induced by a once-in-a-century event, the Indian auto sector is cautiously looking forward to 2021 with hopes of putting up a better show in the post-COVID-19 world, although a lot will hinge on how the economy grows. Passenger vehicle sales in India, the barometer of the automobile industry’s performance, plunged 78.43 percent in the April-June period this year hit by the pandemic, declining for the ninth straight quarter and making it the longest slowdown in 20 years. It is estimated that during the prolonged lockdown, the auto industry suffered losses of more than Rs 2,300 crore in turnover for every single day of closure.

The Role of the Automobile Industry in India GDP has been phenomenal. The Automobile Industry is one of the fastest developing areas in India. The increment in the interest for vehicles, and different vehicles, fueled by the increase in income is the primary growth driver of the automobile industry in India. So, it is very important for a country that is aiming to become a $5-trillion economy by 2025 to provide stimulants for one of the most vital industries in the development of its economy. Globally, a scrappage policy has been followed by a boost in demand in the auto manufacturing sector, especially in Europe and the US. The program is not only expected to reduce environmental pollution and improve road safety by getting end-of-life and unfit vehicles on the road but also encourages the sale of the new vehicle through financial incentives in the form of vehicle registration charges and reduced road tax thereby providing a fillip to the automotive industry. Also, the one scrapping the vehicle would surely buy a new one.



According to the report by Centre of science and environment titled ‘What to do with old vehicles: Towards effective scrappage policy and infrastructure’ India is going to have a humongous load of nearly 2 crores vehicles which will be near to the end of their lives, therefore, their contribution to the pollution is going to be disproportionately high. Moreover according to a note from the ministry of road and transportation highways although commercial vehicles like taxis and three-wheelers, buses, and trucks together constitute about 5% of the total fleet their contribution is nearly 65–70 percent of total vehicular pollution, and among them, the older ones pollute 10-25 times more than a modern vehicle. Older heavy-duty vehicles have a particularly higher impact in smaller cities and towns and the contribution of old diesel cars and two-wheelers can vary between 8-23 percent across cities. All these data showed that old vehicles are still very extensively used and are also a major cause of vehicular pollution and in order to limit the pollution older vehicles must be replaced as rapidly as possible and Further, so that the replacement itself does not lead to environmental problems, proper scrappage policies for junk vehicles have to be adopted and implemented.

Scrapping and replacing automobiles is considered as a way to revitalize COVID-19-affected economies by prioritizing green technologies, particularly electric vehicles (EVs). It can also be viewed as a plan to reach net-zero emissions by the middle of the century as part of the Paris Agreement’s promises.

The plan aims to achieve a wide range of objectives but certain challenges must be tackled. The most critical step in ensuring the proposed policy’s success is to immediately establish an infrastructure of testing and scrapping centers across the country. Implementation of the scrappage policy will be difficult due to a lack of supporting infrastructure. India now has only seven automated fitness test centers and two authorized scrappage centers, which are insufficient to meet the demand. Furthermore, the procedure for deregistering automobiles should be streamlined. Deregistering vehicles is now a miserable procedure for most owners who want to sell or scrap their old vehicles, preventing many people from doing so. However, to overcome this challenge, the Society of Indian Automobile Manufacturers (SIAM), stated that it will work with the government to create an infrastructure for vehicle testing and scrappage centers across the country.


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