April 10, 2021

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Junk affair: Why scrappage policy is next big thing in auto industry

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A recent estimate by MoRTH states that the policy would attract investments close to Rs 10,000 crore. Apart from this, the ministry also expects to create around 3.7 crore jobs in the organized sector after the policy is rolled out.

NEW DELHI: After a long wait, the central govt finally announced the vehicle scrappage policy. Union Minister of Road, Transport and Authority Nitin Gadkari introduced the vehicle scrapping policy in the Lok Sabha on Thursday.

TOI Auto looks at all the aspects related to the introduction of this policy which is nothing short of a milestone in the automotive industry after the BS6 rollout. Find out if this policy impacts you in any away, proves to be beneficial for you or if there is something that needs your attention if you own an old car.

Why is the scrappage policy being introduced?

The vehicle scrappage policy is aimed at creating an eco-system for flushing out old, unfit and polluting vehicles that are still running on the roads. The policy in the long run is expected to improve the fuel efficiency of vehicles, boost localization, increase the availability of low-cost raw materials for industries and increase the GST revenue for the Indian govt.

Which vehicles fall under the scrappage program?

Private vehicles that are older than 20 years and commercial vehicles that are older than 15 years will undergo a mandatory automated fitness test. The old vehicles are meant to be taken off the roads because they are estimated to cause 10-12 times more pollution than the new generation of vehicles.

Apart from privately owned vehicles, Gadkari also said that the policy also applies to govt and PSU vehicles that are older than 15 years.

When is the mandatory testing beginning?

Ministry of Road Transport and Highways (MoRTH) has confirmed that the rules for fitness tests and scrapping centres will be notified by October 1 this year. Mandatory fitness testing for heavy commercial vehicles will begin from April 1, 2023, while the other categories of vehicles will be mandated for fitness testing in a phased manner starting from June 1, 2024.

The vehicles that fail the mandatory tests will be penalized heavily and could also be impounded by the govt.

How many old vehicles need to be phased out in India?

According to the current estimate, the policy would cover around 51 lakh light motor vehicles that are more than 20 years old, another 34 lakh LMVs that are around 15 years old. Apart from the LMVs, a total of 17 lakh medium and heavy motor vehicles which are older than 15 years, currently run on the roads without a valid fitness certificate. The total sum amounts to around 1.02 crore vehicles which are polluting the environment.

How is it beneficial for you?

For now, there’s only one direct benefit announced under the vehicle scrappage policy and that is a 5% rebate on the new car you buy after sending your old car to the junkyard. According to the MoRTH, more incentives are to follow and one of the other benefits could be monetary compensation too.

The policy is also aimed at making India a global automobile manufacturing hub and if that happens India could be looking at a significant reduction in the prices of the vehicles that are manufactured locally. This ultimately benefits the common man as they have to spend a relatively lesser amount from their pockets.

How is the policy beneficial for the auto industry?

Phasing out of the old vehicles is expected to increase the demand in the industry and the overall turnover of the auto industry would increase by around Rs 5.5 lakh crore from the current Rs 4.5 lakh crore.

The recycled material from the old vehicles will also help in reducing the prices of the vehicles and the industry will get a minor boost from this factor too. The industry currently gets revenue of Rs 1.45 lakh crore from exports and this figure could increase to Rs 3 lakh crore. Materials like steel, plastic, rubber, aluminium that are used in manufacturing automobiles would see a significant decrease in their prices too.

Investments and job opportunities after the policy

A recent estimate by MoRTH states that the policy would attract investments close to Rs 10,000 crore. Apart from this, the ministry also expects to create around 3.7 crore jobs in the organized sector after the policy is rolled out.

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