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Post at: Sep 06 2021

Vehicle Scrappage Policy

Why in News?

  • The vehicle scrappage policy was initially announced by the Finance Minister in the Union Budget 2021-22.Recently, on August 13, 2021 Prime Minister Narendra Modi has formally launched National Automobile Scrappage Policy or Vehicle Scrapping Policy through video conferencing at Gandhinagar in Gujarat.
  • It is also named as Voluntary Vehicle-Fleet Modernization Program.

Aim

  • The aim of the policy is to create a viable circular economy and bring value for all stakeholders while being environmentally responsible.
  • This policy will play a big role in the modernization of the vehicular population in the country, removing unfit vehicles from the roads in a scientific manner.

Background

  • There are about 51 lakh vehicles in India which are older than 20 years, 34 lakh vehicles which are more than 15 years old and around 17 lakh vehicles older than 15 years, but do not have vehicle fitness certificates.
  • Old vehicles pollute air 10-12 times more compared to vehicles that are fit, and also pose a risk for road safety.
  • Older vehicles are short on the latest safety features, thus having them removed from the roads will increase road safety.

Key Features of the Policy

What is the Fitness Test Process?

  • The fitness test will determine if an old car is fit to run beyond its technical lifespan. It will also check whether the vehicle is causing greater level of environmental pollution.
  • As part of the fitness test, an old car will also have to undergo a series of safety examinations including braking, engine performance and other tests.
  • All fitness tests will be conducted at automated fitness test centres, which are believed to make the process extra stringent.

Benefits of the Policy

  • The policy pushes for buying of new vehicles by phasing out older vehicles. It is estimated that automobile industry in India will see a jump in turnover to ₹10 lakh crore from ₹4.5 lakh crore.
  • Replacing older vehicles with new vehicles will boost fuel efficiency of the economy.
  • Proper recycling of raw materials obtained from the scrapping will help reduce the import of materials such as aluminium, copper, steel and more.
  • Owners who scrap their old vehicle and plan to buy a new one will get incentives as part of the Vehicle Scrappage Policy.
  • A rebate of up to 25 per cent of road tax will be given to a person when he buys a new personal vehicle after scrapping an old one; the rebate will be up to 15 per cent for commercial vehicles.
  • In addition, vehicle manufacturers have been advised to give a 5 per cent discount on new vehicle purchases to individuals who produce a scrapping certificate and a waiver on the registration fee.

Implementation

  • The tentative date for the implementation of the policy is October 1, 2021. Meanwhile, scrapping of government and PSU vehicles above 15 years will be undertaken from April 1, 2022.

Issues Involved with the ScrappagePolicy

This scrappage policy is the new concept for the Indian populations, therefore, lots of awareness and cooperation is required from the common people. Whereas the policy has some issues like –

  • Limited incentive and poor cost economics for trucks.
  • Lack of addressable volumes for other segments.
  • The potential benefit from scrapping a 15-year-old, entry-level small car will be ₹70,000, whereas its resale value is around ₹95,000. That makes scrapping unattractive.

What can be done to improve?

  • Freight transporters need stronger financial support. However, it is important to note that unless old fleet vehicles are off the road, the benefits of implementation of BSVI vehicles will not be fully leveraged.
  • The government should provide road tax and registration concessions, while the automobile industry is expected to sweeten the deal with genuine discounts on new vehicles.
  • The Centre has to arrive at a balance and have incentives that reward manufacturers of vehicles that are the most fuel-efficient.

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