InvestorQ : What are the key takeaways of the auto scrappage policy introduced in the Lok Sabha?
Suresh Patil made post

What are the key takeaways of the auto scrappage policy introduced in the Lok Sabha?

Tanya Mehta answered.
4 weeks ago
Here are some important takeaways from the auto scrappage policy-

1) According to Union Minister Nitin Gadkari, there are around 51 lakh vehicles older than 20 years on Indian roads. There are another 34 lakh vehicles that are more than 15 years old and around 17 lakh vehicles, older than 15 years without a have vehicle fitness certificate. The idea is to confine these vehicles to the side because not only are the chances of these vehicles emitting toxic fumes higher - often 10 to 12 times more than newer vehicles, but these also pose a threat to road safety.

2) If someone has a private vehicle older than 20 years, he or she will have to get a vehicle fitness certificate for it in order for the vehicle to be legally allowed to continue running on roads here. It is 15 years for commercial vehicles. Gadkari says that the idea is to discourage people from opting for vehicle fitness certificates for such vehicles. A vehicle failing the fitness test or failing to get a renewal of its registration certificate may be declared as an End of Life Vehicle.

3) The scheme will provide incentives to owners of old vehicles to scrap unfit vehicles via registered scrapping centers. Some of the incentives outlined by the Road Transport Ministry include:

  • The scrap value given by the scrapping center is approximately 4-6% of the ex-showroom price of new vehicles.
  • The state governments may be advised to offer a road-tax rebate of up to 25% for personal vehicles.
  • Manufacturers will be advised to provide a discount of 5% on buying new vehicles against a scrapping certificate.
  • In addition, the Ministry is also considering waiving registration fees of new vehicles against the scrapping certificate.
4) Automated fitness tests will be set up as the government will assist private partners and state governments for scrapping centers. Vehicles that fail the automated tests will be penalized with massive fines and also be impounded.

5)This policy is proposed to be advantageous for the auto industry as apart from the obvious impact of a boost in demand for newer vehicles, the scrappage policy is also likely to bring down the cost of components as some of these can be recycled.