Vehicle Scrappage Policy Announced in Budget 2021 by Nirmala Sitharaman

Current Finance Minister Nirmala Sitharaman has just proposed the much-awaited vehicle scrapping policy while presenting the Budget 2021-22. The vehicle scrapping policy claims to be bringing in a Rs 43,000 crore business opportunity by boosting consumption in the auto industry while helping the environment at the same time.

Addressing the House, Sitharaman said, “We are separately announcing a voluntary vehicle scrapping policy to phase out old and unfit vehicles. This will help encourage fuel-efficient and environment-friendly vehicles, thereby reducing vehicular pollution and oil import bills."

She then went on to give a brief idea about how the policy will work. “Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles."

In simple terms, the new vehicle scrappage policy aims to take out the old polluting vehicles from circulation in Indian roads and send to the scrapyard. With vehicles that are older than 15 years which have low resale values and also pollute the environment on a larger scale, sending them to the scrapyard will offer the owners monetary compensation. They can then use this money to buy a new vehicle.  The policy will help the environment as well as increasing demand for new vehicles. This will boost the recycling industry also as the number of scrap materials that can be used to produce new products.

“Details of the scheme will be separately shared by the ministry," said Sitharaman.

Vehicle scrappage policy has been one of the most discussed issues and is a much-awaited scheme for the Indian auto industry, but has been bogged down by delays over the last several months.  A few days ago, Nitin Gadkari, Union Minister for Road, Transport and Highways, had approved the scrappage policy of Government department and PSU vehicles which are older than 15-years. The new policy will come in effect from 1^st April 2022, MoRTH has stated. And according to them once the vehicle scrappage policy is approved, India will become an automobile manufacturing hub and costs of the vehicles will come down. An added benefit is that the new policy will help other sectors involved in the car producing ecosystem as well.