Vehicle Scrappage Policy in India: Benefits and Impact

Posted on: Apr 12, 2021 | 3 mins | Written by: HDFC ERGO Team

Vehicle Scrappage Policy in India: Benefits and Impact

The government has always been concerned about vehicular pollution and driver safety, which is why they are constantly developing new ways to regulate and upgrade vehicles. The Vehicle Scrappage Policy is one recent step in this direction. The policy is being debated and will apply to all vehicles, including private, commercial and government-owned vehicles. The scrappage policy is expected to bring a change to the Indian automobile market.

What is India's New Vehicle Scrappage Policy?

The vehicle scrappage policy in India was launched in 2021 and took effect in April 2022. The Indian scrappage policy was launched to combat the growing global vehicular pollution problem. This policy aims to achieve a more sustainable mode of transportation. A scrappage policy mandates a mandatory process that the owners of vehicles older than 15 years have to go through. This age was proposed so that the oldest running vehicle is 25 on the roads. The non-declaration means the old vehicle will go off the road and be sold for scrap. The government-backed program will scrap all old passenger and commercial vehicles, thus helping to reduce air pollution in urban centres and enhancing road and passenger safety. Additionally, this could lead to some significant growth in vehicle sales.

Under the scrappage policy, all passenger and commercial vehicles older than 20 and 15 years will be required to undergo a "fitness and emissions test." The government has made it mandatory for some cars that meet specific pre-determined criteria to be scrapped. A marked collapsed roof is one such criterion to be eligible to be scrapped. A car that doesn't find itself in the solid welded condition and is towed away also meets this criterion. Vehicles that fail these will have their registration cancelled.

The vehicle, which is to be over 20 years old in case of a passenger vehicle, will undergo a fitness test less severe than that implemented for 15-year-old passenger vehicles. If the car doesn't pass this, it will immediately be termed unfit, the registration will be cancelled across the country, and the old vehicle will need to be scrapped. Alongside this, to incentivise the selling of this vehicle, although it is unfit, there is a 5 per cent rebate on purchasing a new car with a scrappage certificate.

It is essential to have two-wheeler insurance to protect yourself and your vehicle in case of unforeseen circumstances. Comprehensive bike insurance, in particular, provides coverage not only for damages to your own vehicle but also for third-party liabilities.

The new vehicle scrappage policy may present some challenges for vehicle owners. Owners of older vehicles will have to bear the costs of scrappage, as well as the expenses of purchasing a new vehicle or upgrading to a newer model. However, this policy also presents an opportunity for vehicle owners to contribute to a cleaner and greener environment by opting for more sustainable transportation options.

What is the Objective of the Vehicle Scrappage Policy?

The objective of the Vehicle Scrappage Policy is to phase out old cars, reduce urban pollution levels and stimulate automotive sales, which continue to record a slowdown amid India’s post-COVID recovery phase. Additionally, the vehicle scrappage policy is also part of a larger stimulus package that is majorly requested by original equipment manufacturers (OEMs) to stir their demand. Under the policy, the Government will set up automated testing stations and scrapping facilities in phases. Currently, 75 stations are proposed under Phase 1; this count will gradually scale to 450–500 stations across the country. The Government has also welcomed private players to invest in setting up such stations through a partnership with the state governments. The Government also plans to set up 50–70 facilities for scrapping vehicles in the next 4 to 5 years.

Why was this scrappage policy needed?

Vehicle ownership has increased dramatically over the last few years. India is the world’s seventh largest automobile manufacturer, with the majority of its production consumed domestically. Especially for two-wheelers, India is among the world’s largest markets. While this has resulted in numerous economic benefits, it has also resulted in India becoming a highly polluted country, with automobiles contributing significantly to pollution.

Another problem has been the extremely high rate of road accidents and the extremely low safety features of the vehicles manufactured in India. Despite concerted efforts by the government, such as making two-wheeler insurance mandatory to safeguard owner-drivers, the number of fatalities remains low. It is important to incentivise people to switch to newer vehicles that emit fewer emissions and are safer to drive. In such a scenario, a vehicle scrappage policy is being developed as a formal legal framework to encourage people to upgrade to newer vehicles.

How does this policy impact you as a two-wheeler owner?

The Indian government recently announced the Vehicle Scrappage Policy as part of its efforts to promote sustainable practices in the automotive industry. As a two-wheeler owner, you may be wondering how this policy will impact you. Here are some key points to consider:

1. Increased Demand for New Vehicles:

With the mandatory scrappage of old vehicles, there will be a surge in demand for new two-wheelers. This could result in a more competitive market with better options for consumers.

2. Compliance Costs:

Owners of old two-wheelers will need to bear the cost of scrapping their vehicles. However, the incentives provided by the government may help offset these costs to some extent.

3. Insurance Implications:

The Vehicle Scrappage Policy may have implications for your two-wheeler insurance. It is important to review your policy and ensure that you are adequately covered, especially if you plan to scrap your old vehicle and purchase a new one.

When Will the Vehicle Scrappage Policy Come into Effect?

In January 2021, the vehicle scrappage policy was approved for government vehicles. The vehicle that belongs to the central and state government and is more than 15 years old will be scrapped. As of now, the vehicle scrappage policy is effective from April 1, 2022, for government and PSU vehicles. However, if your private vehicle is 15 years old, it needs to undergo a fitness test by RTO.

What are the benefits of Vehicle Scrappage Policy 2021?

Let us explore the advantages that come with Vehicle Scrappage Policy 2021 and how it can benefit both you as a vehicle owner and the environment.

1. Financial Incentives

One of the key benefits of the Vehicle Scrappage Policy is the financial incentives that are being offered to vehicle owners. By scrapping your old vehicle, you can avail of monetary benefits or tax waivers, which can help offset the cost of purchasing a new vehicle. This can be particularly beneficial for those looking to upgrade their vehicles but are deterred by the high costs involved.

2. Environmentally Friendly

Scrapping old vehicles helps in reducing pollution and greenhouse gas emissions. Older vehicles tend to be more polluting and contribute significantly to air pollution. By phasing out these vehicles, the overall air quality can be improved, leading to a healthier environment for everyone.

3. Safety and Efficiency

Older vehicles are more prone to breakdowns and accidents due to wear and tear. By scrapping these vehicles, road safety can be improved significantly. Newer vehicles also tend to be more fuel-efficient, saving you money on fuel costs in the long run.

Benefits for the Environment

Let us explore the advantages that come with Vehicle Scrappage Policy 2021 towards the environment.

1. Reduction in Pollution

As mentioned earlier, old vehicles are major contributors to air pollution. By phasing out these vehicles, the overall pollution levels can be reduced, leading to a cleaner and healthier environment for all. This will have a positive impact on public health and quality of life.

2. Conservation of Resources

Scrapping old vehicles not only reduces pollution but also helps in conserving natural resources. The materials from scrapped vehicles can be recycled and reused, reducing the need for new raw materials. This contributes to sustainable practices and helps in conserving our limited resources.

What is the Categorisation of Vehicles for the Scrappage Policy?

1. Commercial Vehicles

Commercial vehicles are the ones used commercially for transport purposes. Such motor vehicles will undergo a fitness test after completing 20 years. If the automobile doesn't pass the test, it will be scrapped as per the vehicle scrappage policy 2021.

2. Private Vehicles

Private cars or bikes are vehicles that citizens own. Like commercial vehicles, private cars and two-wheelers will be scrapped after 15 years if they are declared unfit for the test.

3. Government Vehicles

As per the new automobile scrappage policy 2021, vehicles that are more than 15 years old and owned by the state and central government will be scrapped.

4. Vintage Vehicles

Vintage vehicles are usually older than most four-wheelers and two-wheelers; however very precious and close to many people's hearts. They are also driven less often; hence, these vehicles will have separate terms and conditions for scrappage.

What are the Incentives for Scrapping Old Vehicles?

Some incentives for scrapping old vehicles and buying new ones are as follows:

• Two-wheeler or car Manufacturers can give up to a 5% discount for buying new vehicles.

• zero registration fee for new vehicle purchases.

• Owners can receive scrap value equivalent to 4–6% of the ex-showroom price of new vehicles

• States can give up to 25% and 15% rebate on road tax for personal and commercial vehicles, respectively.

Where should I get the vehicle tested or scrapped?(new heading)

Knowing where to get your vehicle tested or scrapped is essential for maintaining road safety and proper disposal of old vehicles. Whether you need to renew your two wheeler insurance, get comprehensive bike insurance, or adhere to the vehicle scrappage policy, make sure to follow the necessary steps to ensure compliance.

Here are some common places where you can get these services:

1. Authorised Testing Centers:

Many countries have authorised testing centres where you can take your vehicle for roadworthiness tests. These centres follow strict guidelines set by the government to ensure that vehicles on the road meet safety standards. Check with your local transport authority for a list of authorised testing centres in your area.

2. Scrap Yards:

If you need to scrap your vehicle, you can take it to a scrap yard or recycling centre. These facilities are equipped to dispose of vehicles in an environmentally friendly way, ensuring that various components are recycled or disposed of properly. Before taking your vehicle to a scrap yard, make sure to remove any personal belongings and follow any specific instructions provided by the facility.

3. Car Dealerships:

Some car dealerships offer vehicle testing services as part of their after-sales support. If you purchased your vehicle from a dealership, they may have facilities to conduct tests or inspections to ensure that your vehicle is in good condition. Similarly, some dealerships may offer vehicle scrappage programs where you can trade in your old vehicle for a new one.

What are the Disincentives of Holding an Old Vehicle?

Owners who will keep personal vehicles which are 15 years old will have to bear the fee for conducting fitness tests and renewal of fitness certificates for motor vehicles. There will also be an increase in the fitness certification fee for more than 20 years for transport vehicles. Lastly, there will be an increase in the renewal of registration fees for personal vehicles (non-transport vehicles) more than 15 years old.

What are the RTO Rules For Selling Bikes as Scrap in India?

If you are looking to sell your bike as scrap in India, here are the following RTO rules you should know:

1. The chassis number of the bike needs to be removed before the scrap is sent for recycling.

2. The bike owner should connect with an authorised scrap dealer. The dealers should ensure that the bike is scrapped in such a way that it does not impact the environment.

3. The bike owner should also get in touch with the RTO and inform them about the scrapping as well. One also has the option to deregister the bike.

4. The scrap dealer is going to perform a physical inspection and quote the price on the premise of the vehicle's weight. Once the agreement stage is reached, the scrap dealer will then remove the bike's parts.

5. Ensure that the scrap dealer scraps the vehicle. Take pictures of the same for assistance in the future.

Conclusion

The Vehicle Scrappage Policy is a progressive initiative that not only promotes environmental sustainability but also offers various benefits to vehicle owners. By participating in this policy, individuals can contribute to a cleaner environment while also receiving incentives for scrapping their old vehicles. Additionally, investing in two wheeler insurance or comprehensive bike insurance can further protect new vehicles and provide added security for owners. Embrace the Vehicle Scrappage Policy today and make a positive impact on the Vehicle Scrappage environment and society as a whole.

FAQ

1. What is Policy?

The Vehicle Scrappage Policy is a government initiative that aims to phase out old and polluting vehicles from the roads. Under this policy, vehicles that are over 15 years old will be required to go through a mandatory scrappage process. This could have implications for vehicle owners, especially in terms of insurance coverage.

2. How does the vehicle scrappage policy impact two-wheeler insurance?

If you own a two-wheeler that is over 15 years old and is subject to the Vehicle Scrappage Policy, you may need to reevaluate your insurance coverage. Comprehensive bike insurance, which provides coverage for damages to your vehicle as well as third-party liability, may need to be adjusted or renewed based on the scrappage requirements.

3. What should two-wheeler owners do to prepare for the vehicle scrappage policy?

To prepare for the Vehicle Scrappage Policy, two-wheeler owners should first check the age of their vehicles to see if they fall under the scrappage criteria. If your vehicle is over 15 years old, it may be time to start looking into the scrappage process and how it will impact your insurance coverage. You may need to consider upgrading to a new vehicle or renewing your insurance policy accordingly.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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