Certificate to incentives, govt gives scrappage policy details

New Delhi: Union minister for road transport and highways Nitin Gadkari on Thursday announced the details for the country’s long-awaited vehicle scrapping policy in Parliament, explaining that the absence of a fitness certificate will mean an automatic cancellation of registration for commercial vehicles that turn 15, and that the registration of a private vehicle will be for 20 years, with renewal requiring proof of fitness. The minister added that the government plans to incentivise owners of old vehicles to scrap these through registered scrap centres.

The policy, which also recommends the mandatory scrapping of all government vehicles over 15 years old, applies only to four-wheeled vehicles.

India has 17 lakh medium and heavy commercial vehicles that are older than 15 years without any valid fitness certificate, 51 lakh light motor vehicles older than 20 years and 34 lakh light motor vehicles older than 15 years, according to the transport ministry. The average age of commercial vehicles is over 10 years and the private ones, 10-15 years.

The move is expected to reduce pollution, create job opportunities, through the registered scrapping centres, and boost demand for new vehicles.

“It is proposed that commercial vehicles be deregistered after 15 years in case of failure to get the fitness certificate. As a disincentive measure, increased fees for fitness certificate and fitness test may be applicable for commercial vehicles 15 year onwards from the date of initial registration,” Gadkari said in Lok Sabha.

“It is proposed that private vehicles be deregistered after 20 years if found unfit or in case of a failure to renew registration certificate. As a disincentive measure, increased re-registration fees will be applicable for private vehicles 15 years onwards from the date of initial registration,” he added.

“It is being proposed that all vehicles of the Central Government, State Government, Municipal Corporation, Panchayats, State Transport Undertakings, Public Sector Undertakings and autonomous bodies with the Union and State Governments may be de-registered and scrapped after 15 years from the date of registration,” Gadkari said.

“Indian automobile industry has already upgraded to one of the most advanced emission standards. While new vehicles will be least polluting, vehicles which are old creates enormous pollution with least safety standards will now be eligible for scrappage thus making roads safer and air cleaner. The guidelines and advice announced today are in the right direction and now, the State Governments and OEMs have to do their part to make it a success. Scrappage value of vehicle in range of 4-6% of the ex-showroom price, rebate of upto 25% for PV and 15% for CV by State Governments on Road Tax, 5% discount from OEM’s on new vehicle and registration fee being waived off will definitely help to excite the customer and motivate him to scrap his old vehicle. It will also revive the ailing CV segment and in turn will boost State exchequer’s revenue on sale of new vehicles,” said Federation of Automobile Dealers Associations (FADA) president Vinkesh Gulati.

“We welcome the announcement made by Ministry of Transport and it’s a good mix of both - incentives for those who opt to scrap their old vehicles and an additional burden for those who would like to continue with their old vehicles. This fine balance should help in driving old vehicles out of road leading to reduction in pollution levels and driving demand for new vehicles across all the segments. This announcement will also lead to creation for more scrapyards in the country and effective recovery of waste from old vehicles” said Rajeev Singh, Partner and Automotive Leader, Deloitte India.

India’s long-pending voluntary vehicle scrapping policy for phasing out of old vehicles considered to be more polluting has been in the works since 2016, but was announced by Union finance minister Nirmala Sitharaman in the Union Budget for 2021-22. The policy of scrapping old, polluting and fuel-guzzling vehicles is an attempt to reduce pollution and road congestion . It was sent to the Cabinet Secretariat to be put up before the cabinet for its approval in February 2020.

The transport ministry will, in the next few weeks, publish draft notifications and seek public comments within a period of 30 days, the ministry said.

Gadkari said that the scrapping policy will lead to new investment of around Rs10,000 crore and create 35,000 jobs. The minister said the policy will cover an estimated 5.1 million light motor vehicles (LMV; mostly cars) that are above 20 years of age, while another 3.4 million LMVs are above 15 years. It will also cover 1.7 million medium and heavy motor vehicles (trucks, buses, commercial vans), that are above 15 years, and currently without valid fitness certificates.

“The scheme shall provide strong incentives to owners of old vehicles to scrap old and unfit vehicles through registered scrapping centres, which shall provide the owners with a scrapping certificate,” Gadkari said.

Some of the incentives are: scrap value for the old vehicle given by the scrapping centre, expected to be 4-6% of the price of a new vehicle; a potential road- tax rebate of up to 25% for new personal vehicles and up to 15% for new commercial vehicles from the states; and a potential discount of 5% offered by auto companies against the scrapping certificate, the policy said.

At a press briefing later on Thursday, Gadkari said he has requested the Union finance minister and states to give concession in the Goods & Services Tax on the purchase of new vehicles for those scrapping older vehicles. He also said that vintage cars will be kept out of the scrapping policy.

The policy also states that registration fees may also be waived for purchase of new vehicle against the scrapping certificate.

“The Ministry of Road Transport and Highways will promote setting up of Registered Vehicle Scrapping Facilities (RVSFs) across India and will encourage public and private participation for opening up of such centres. Efforts are also being made to set up integrated scrapping facilities across India. Some of the identified places include Alang in Gujarat, where it is being planned to develop a highly specialized centre for scrapping among many other potential centres, where different scrapping technologies can be synergised ,” Gadkari said.

Alang is a global centre for ship breaking.

The minister also said Centre will promote the creation of Automated Fitness Centres on a Public Private Partnership model by state government, the private sector and automobile companies.