October 19, 2021

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Vehicle scrappage policy : benefits to owners and implementation

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This article is written by Anushree Singh, from Kirit P. Mehta School of Law, NMIMS, Mumbai. In this article the author discusses the significance of this strategy and determination in India.

Table of Contents

The Indian government has formally launched its vehicle scrappage policy, which seeks to gradually phase out unsuitable and polluting automobiles in a sustainable way. The infrastructure for this initiative will be provided by Automated Testing Stations and Registered Vehicle Scrapping Facilities located throughout the country. After the registration period of a vehicle expires, the scrappage policy takes effect. In general, private passenger cars have a 15-year life duration, whereas commercial vehicles have a ten-year life period, during which time they become substantially more polluting than when they were initially acquired.

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The policy has several beneficial objectives. Because outdated automobiles are a major source of pollution, removing them from circulation will benefit public health and aid in the fight against climate change. The shredding of old vehicles will result in a significant rise in production and sales of new vehicles, which will benefit the automobile industry and its associated businesses. India’s cities are amongst the most polluted in the world. This article examines the research on policies and strategies aimed at accelerating car scrappage. 

We find that while significant model efforts have been made to capture the direct reaction of households with older cars to the scrappage schemes, indirect effects on the second-hand car market, car use and emissions, and lifecycle emissions have gotten significantly less attention. Emission effects are minor and only last a brief time. Scrapping schemes are frequently inefficient in terms of cost. The best cost-effectiveness ratings are found in densely populated locations, and only (or primarily) when old (or no) pollution control measures are eliminated. 

  • The strategy intends to eliminate old, unsuitable, and polluting automobiles by establishing an infrastructure for automated vehicle testing after a registration period has ended. A registration certificate for a passenger car is valid for 15 years from the date of issue, whereas a registration certificate for a commercial vehicle is good for ten years. After the expiration of the period, the scrappage policy will take effect, i.e., the vehicle must pass a necessary fitness test. According to the motor vehicle law, a commercial vehicle’s fitness certificate must be renewed every year once it reaches the age of eight years. For the first eight years, the vehicle must be tested every two years.
  • If a vehicle passes the fitness test, it will have to repeat the process every five years to ensure that it is in good working order.
  • In the case of private automobiles, a valid fitness certificate will be required for the renewal of registration certificates after the first 15 years. The renewed certificate will be provided for a term of five years.
  • The Vehicle Scrappage Policy’s aim is to gradually phase out and recycle older cars through a methodical procedure. The policy’s ultimate objective is to decrease environmental pollution produced by older cars that have exceeded their useful life and continue to operate without a valid fitness certificate. Recycling obsolete cars contributes to the reuse of critical resources such as steel, plastic, and copper. This will result in a decrease in production costs. Additionally, the programme attempts to increase vehicle sales in the country by offering incentives for purchasing a new vehicle.
  • It aims to gradually replace obsolete vehicles, starting with commercial vehicles and gradually spreading to individual four-wheeled cars. Instead of the current 28 percent tax on commercial vehicles and those transporting 10 or more people, it proposes a 5 percent GST or a complete exemption for the replacement of commercial cars. This will encourage people to scrap their old cars.
  • It also proposes lower new-car prices for buyers who replace older vehicles, which may be obtained by presenting paperwork proving the sale of an older vehicle. The advantage granted is estimated to be roughly 15% of the vehicle’s purchase price.
  • The Department of Heavy Industries will open vehicle scrapping centres to prepare the ecosystem for the policy’s implementation. Under the Sagarmala programme, several of these clusters would be built near ports. These clusters would process scrap vehicles from all over the world, separate and recycle their components, and lower the cost of automobile parts in the process.
  • Unfit automobiles will be scrapped, resulting in reduced emissions and improved air quality.
  • As old vehicles are scrapped, demand for new vehicles will increase because the old ones will need to be replaced. Over 51 lakh light motor vehicles (both private and commercial) are over the age of 20 years. Overall, the new scrappage policy will assist the vehicle industry by creating more work possibilities. New vehicle scrapping centres, for example, will require workers. New sophisticated automobiles will be safer in comparison. New cars, for example, come with enhanced safety systems. In addition, the recycling business will be more active, resulting in more revenue. Vehicle owners may be eligible for tax breaks if they scrap an outdated vehicle. Vehicle owners may also be able to acquire the suitable price for scrapping the car for usable parts like tyres, steerings.
  • Importantly, a vehicle should be scrapped at the end of its life cycle so that it can no longer be driven on the road. This policy of removing older vehicles will free up room for new automobiles, boosting sales in the otherwise damaged Indian auto industry.

Benefits of the vehicle scrappage policy

  • The first benefit is that when the old car is scrapped, a certificate will be issued. Anyone who holds this certificate will not be required to pay any registration fees when purchasing a new vehicle. In addition, he will be excused from paying some road taxes. 
  • The second advantage is that the old vehicle’s maintenance, repair, and fuel efficiency costs will be reduced.
  • The third advantage is directly tied to living. The significant danger of road accidents caused by obsolete vehicles and outdated technology would be alleviated. Fourth, it will lessen pollution’s negative impact on our health.
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The government envisions that the scrappage certificate will entitle the owner to something additional, as a tax rebate and a discount on a new automobile, to enable vehicle owners to find a cause to retire old vehicles. The certificate is transferable, which means it can be utilised by anybody and not just the wrecked vehicle’s owner.

Scrappage policies have boosted demand in the vehicle manufacturing sector around the world, particularly in Europe and the United States. This has also been a technique for dealing with the manufacturing sector’s slowdown and reduced consumer spending as a result of the recession. Furthermore, there are spelt-out environmental benefits, as newer cars have improved emission limits and fuel efficiency.

The disassembly of vehicles for spare parts is known as vehicle recycling. Vehicles have value as a source of replacement components as they reach the end of their useful life, which has given rise to the car dismantling industry. Wrecking yard, auto dismantling yard, automotive spare parts supplier, and, more recently, auto or vehicle recycling are all terms used to describe the industry’s business outlets. Vehicle recycling has long been a part of the process, but in recent years, manufacturers have gotten more active. A car crusher is frequently used to decrease the size of a discarded automobile so that it can be transported to a steel mill.

If a vehicle fails the automated fitness test, the allowed retest, and the reinspection test if ordered by the appellate authority, it will be considered end-of-life or unfit.

The policy is a critical link in achieving a waste-to-wealth circular economy. It will also re-energize India’s car and metal industries by following the reuse, recycle, and recover principles. According to environmentalists, the regulation is a significant step forward for the environment because it will not only help reduce air pollution created by obsolete vehicles but will also limit the immense harm that clunkers can wreak. The scrappage policy will be phased in over time and is unlikely to have a significant impact on the overall car or commercial vehicle sales anytime soon. The strategy, which aims to recycle outdated and unfit vehicles, would give India’s transportation and auto sector a new identity.

The summit, which drew potential investors and industry stakeholders, was held to encourage investment in car scrapping infrastructure as part of the Voluntary Vehicle-Fleet Modernization Programme.

People who donate their old vehicle to be scrapped will receive a certificate from the government under this arrangement. People who have this certificate will not be charged a registration fee when purchasing a new vehicle. They will also be eligible for a road tax rebate to the scrappage industry to adapt its approach. 

According to the government, the policy would play a major role in the ‘Waste to Wealth’ initiative, as well as helping to reduce pollution in our cities. Today’s announcement of the Vehicle Scrappage Policy is a huge step forward in India’s growth. 

  • The centre has established several incentives for anyone who wants to get rid of their outdated, inefficient vehicles.
  • First, owners of such vehicles will receive a scrap value equivalent to 4% to 6% of the showroom price of the new vehicle they will be purchasing. 
  • Second, if the owner presents proof of deposit, there will be no registration fees for the new vehicle purchase. 
  • Third, state governments have been urged to grant tax breaks on motor vehicles, with discounts of up to 25% for non-transport vehicles and up to 15% for transport vehicles.
  • Fourth, vehicle makers have been urged to offer a 5% discount on new vehicle purchases made with a certificate of deposit. Purchasing a new vehicle will help reduce maintenance expenses and allow users to save more money on gas.

According to the road map, the centre has ordered the establishment of automated testing stations to reduce manual vehicle testing. In the first phase, 75 stations are suggested to be established, and this will be scaled up to 450 to 500 stations around the country.

The government has also encouraged corporate entities to contribute to the establishment of such stations through public-private partnerships (PPPs). in collaboration with the state government. Similarly, registered car scrapping facilities would be established across the country to encourage safe vehicle scrapping. The centre expects to establish 50-70 such facilities over the next 4-5 years.

When comparing well-kept vehicles versus badly maintained vehicles, vehicle exhaust emission measurements demonstrate that most vehicles contribute relatively little to pollution. Regulatory policies based on a computer model that target all vehicles equally without recognising the overriding importance of individual maintenance may not be cost-effective or ineffective because of this factor. Although poor maintenance correlates with increasing vehicle age, different states of maintenance among vehicles or within a given model year far outweigh the average effect of age.

The government’s vehicle scrappage policy is in line with several other initiatives aimed at reducing vehicular pollution, including the promotion of alternative fuels, the FAME (Faster Adoption of BSVI Stage Emission Standards for Vehicles) scheme, and the advancement of the adoption of BSVI stage emission standards for vehicles. To balance public interest, the strategy aims to replace 20-year-old automobiles by 2020. This dilutes the intended goal and must be corrected.

There is a dearth of a comprehensive analysis of the benefits and drawbacks of scrapping programmes, including all dominant impacts and their causes in a detailed manner. Nonetheless, on account of the above-mentioned facts, we can conclude that the impacts and cost-effectiveness of scrapping programmes are fairly sound.


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