India's Vehicle Scrappage Policy - Here's What It Means For You As A Buyer And Owner

by Chandrutpal Kashyap | 26/04/2021
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The new vehicle scrappage policy entails that any vehicle over 20 years is eligible to be scrapped. However, if you do want to keep your vehicle, you'll have to go through multiple tests and pay extra taxes. Full story below.

As the Indian government reveals the finer points of the vehicle scrappage policy, there are a host of measures that have been drawn up to incentivize you to scrap your old vehicle. On the other side, if you choose to keep your old vehicle, the government is drawing up disincentives as well. Today we take a look at what it means for you as a car buyer and an owner.


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India's Vehicle Scrappage Policy, Here's What It Means For You As A Buyer And Owner


The first thing to take note of is that the entire policy is voluntary and owning a vehicle over 20 years old does not mean it will be scrapped voluntarily. This makes sense as a lot of classic and vintage classic vehicles exist in India and are in excellent condition, which needs to be preserved. Furthermore, retired owners will argue that their hatchbacks or sedans are in great condition and at this late stage in their lives, there would financial concerns and reluctance to buy a new vehicle. Older vehicles can be kept on the road, but they will have to undergo a mandatory fitness test and will also attract additional fees and taxes.


Just like the Registered Vehicle Scrapping Facility is voluntary, the Ministry of Road Transport and Highways will encourage individual participation in opening Automated Fitness Centres as well. Vehicle owners will have to book an appointment online, with the online test reports being forwarded to the concerned officials. It is suggested that if a vehicle fails it will be given the reasons for the rejection and will get the opportunity to be tested two more times, failing which means it will be mandatorily scrapped.


During the time of renewal of the Registration Certificate after 15 years, a Green Tax will be charged on personal vehicles as well. Currently, Green Tax is already applicable in a few cities and is now set to be implemented nationwide with different rates, with cities with high levels of pollution going up as much as 50% of the road tax. These rates will vary depending on fuel type, as well as the type of vehicle with greener vehicles like strong vehicles, EVs and alternative fuel vehicles like LPG, CNG and ethanol will be exempted altogether.


The latest draft notification states that buyers who scrap their old vehicle can gain up to a 25% road tax on the new one, for a period of 15 years from the date of registration. Buyers will also be exempted from paying the registration fees for their new car. However, this proposal from the Centre still needs the states’ approval. This could turn tricky and may take some time, as states are already complaining about the delayed GST compensations, also having lost out on considerable revenue due to the Covid-19 pandemic. The states are likely to seek some amount of compensation from the Centra, which is short of cash as well.

Additional concessions may be provided by auto manufacturers, who have been advised to provide a 5% discount on buying a new vehicle against a scrapping certificate. This discount too though isn’t as easy as it seems.


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India's Vehicle Scrappage Policy, Here's What It Means For You As A Buyer And Owner


The auto industry isn’t going to be in a particularly charitable mood as it is already facing the burden of increasing commodity prices, especially. Most automakers have hiked the prices of their vehicles to offset the commodity price spiral. An industry official has stated that to manage the scrappage incentive, the easier way out is to hike prices by 5% and then offer the discount.


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