India’s Vehicle Scrapping Policy | An Insight

Whilst battling the worst sales slump India has experienced in the last two decades, car manufacturers within the past 8 months, have recalled more than 85% of their cars in 2018. As per latest updates more than 2.12 lakh two-wheelers, cars and SUVs have been recalled by more than 1 dozen car manufactures between the month of January and August 2019. The government has tried to shift its focus to a formal vehicle scrapping policy that will not only help improve sales but help cut down the number of vehicles in the country. If you are wondering what this scrappage policy is and what it is likely to entail when announced, here’s a complete lowdown about India’s vehicle scrappage policy and what to expect from it.

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What is Vehicle Scrappage Policy in India?

The vehicle scrappage policy is a government-funded programme to replace old vehicles from Indian roads. The scrappage programme is intended to stimulate the already dying automotive industry as well as taking major steps for pulling severely polluting vehicles off Indian road.

• India’s Cabinet Finance Minister Smt. Nirmala Sitharaman stated in her press conference that the government shall consider a scrappage policy among other steps to boost demand in the automotive sector.
• Several countries across the globe, including the US, Germany, Canada, China, etc. have Instituted vehicle scrappage policies during the 2008 global recession so as to boost their respective automotive sector. For example, the USA has implemented CARS (Car Allowance Rebate System), also called Cash for Clunkers programme, which offered credit incentives on scrapping older vehicles and replacing them with new and more fuel-efficient vehicles.
• The vehicle scrappage policy is being considered to be more country-specific in its approach, According to leading sources, the government shall limit the scope of the policy to just commercial vehicles only and add passenger vehicles at a much later stage.
• Additionally, the vehicle scrappage policy is also said to be a part of a stimulus package majorly requested by the OEM’s (Original Equipment Manufacturer) to infuse their demand. This step is also being considered to reel the downfall from which the automotive industry is suffering from the past 10 months.

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What is Voluntary Vehicle Fleet Modernisation Programme?

• The first draft for the voluntary vehicle fleet modernisation programme was first introduced in 2016 by The Road Transport and Highways Ministry. The basic ethics for the plan is to propose several tax benefits and discounts to people who will junk or replace their old vehicles.
• As per the proposed policy, Vehicles bought which were bought prior to March 2005 or in other terms vehicles which are below the BS4 standard would be given lucrative incentives if scrapped or replaced. These incentives are due to reduce the average cost of a new vehicle for an avid buyer with an average of 8-12 %. Typically the vehicles more than 10 years of age, constitute 15% of the total fleet pollute 10-12 times more than a new vehicle as they.
• This programme is expected to reduce the overall emission by 25-30% and will also save the oil consumption by 3.2 billion litres per year. This in-turn shall save ₹7000 crores in Oil imports. Adding further, the policy is also set to boost sales for automotive manufacturers which shall increase production capacity for manufacturers.
• Besides reducing the emissions, it will generate steel scrap of approximately ₹11.500 crores reducing the steel import burden

Read In-depth About Voluntary Vehicle Fleet Modernisation Programme

What are the benefits of Vehicle Scrappage Policy in India?

Under the policy, the government intends to incentivise scrapping of 15-year-old vehicles, which is a good incentive for medium and large fleet operators to replace their depreciating fleet. Gopal Mahadevan, CFO, Ashok Leyland.

• Scrappage policy may boost M&HCV sales by 60% over the next three years.
• The Minister of Road Transport and Highways (MoRTH) Shri. Nitin Gadkari recently said that the Cabinet will soon decide on the proposed vehicle scrapping the policy. The union minister earlier stated that he has already cleared a cabinet role on the proposed policy and the finance ministry has also approved the same. “I have already signed the file for the cabinet note on the policy for the scrapping of old vehicles.
• The Finance Ministry has previously approved the note on it, Gadkari said on the sidelines of an event. However, Gadkari had previously said that once the scrappage policy is approved, India could emerge as a hub for automobile manufacturing as key raw material will be available from scrapping steel, aluminium and plastic are bound to be recycled. This shall, in turn, bring down automobile prices to about 20% to 30%.
• The policy is also expected to generate new business and job opportunities as new scrapping centres are set up across the country. Additionally, among several other provisions, the government is also citing to increase the re-registration fees by 25 times (i.e ₹600 to ₹15,000) Adding further the re-registration fees for commercial four-wheeler vehicle will be ₹20,000 from ₹1,000 now.
• The government is also urging banks to provide auto loans much cheaper and to increase credit availability to non-banking lenders as well.

What are the challenges faced by India’s Vehicle Scrapping Policy?

• Even though the nation is at the verge of getting its own scrapping policy but the truth stands as we do not have any government-owned scrapping workshops. Although we do have an only government-authorized scrappage workshop which is situated in Greater Noida and is owned by the Indian auto giant Mahindra Accelo, which is indeed a joint venture between Mahindra & Mahindra and Metal Scrap Trade Corporation Ltd (MSTC). However, Recently Maruti Suzuki and Toyota too announced their joint venture for vehicle recycling.
• The National Green Tribunal (NGT) has directed the government to develop standard operating procedures (SOP) for setting up of vehicle recycling centres in the country. The tribunal directed the government after noting that the number of vehicles older than 15 years will reach over ₹2.1 crores in India.

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How can you scrap your car in India?

• Car Scrapping in India is not an organized activity as compared to the sale of second-hand cars. In fact, no mandates have been specified by the RTO for scrapping an old car in India. The NGT (National Green Tribunal) has ordered a ban on the use of vehicles that are older than 15 years.
• Scrap markets like Mayapuri in Delhi have sealed under the directive of the NGT for air pollution, water pollution, illegal scrapping, illegal handling of chemicals and encroachment.
• However, car owners have the option to sell or transfer the vehicle to a neighbouring state before the Registration Certificate (RC) expires. When the car is to be transferred to another state, it is to be re-registered at the new RTO, and this registration has to be updated in the records of the old RTO (Road Transport Office). Car scrapping is an option in front of car owners who are not willing or keen on transferring the vehicle to another state.

7 Things to remember while scrapping a car in India

1. When the car is scrapped, its chassis number will be taken out before the scrap is sent for recycling.
2. The car owner will be expected to approach an authorised scrap dealer for car scrapping. The dealer should be able to ensure that the vehicle is disposed of in a safe manner without any adverse impact on the environment.
3. The car owner is also required to approach the RTO and inform them about the scrapping of the vehicle. There is an option to de-register the car as well.
4. The scrap dealer will perform an all-over physical inspection of the car and quote a price for scrapping based on the weight of the vehicle.
5. It is not important to submit the original RC to the scrap dealer. The car owner will be required to furnish a photocopy of the RC.
6. The car owner will be allowed to take photos of the scrapped car as evidence for further procedures at the RTO.
7. The car owner has to also take care whether the scrap dealer has actually scrapped his/er car. As there could be an instance where the dealer does not really scrap the car but uses it for illegal activities.

How much can I get for scrapping a car in India?

If the car is not found in working conditions by the RTO officials. It is likely that you will get the rate per the designated weight of the parts. The amount set to at Rs15 per kg for all metal parts.
However, If the car is in good working condition, the scrap dealer will be able to sell the spare parts of the vehicle and only the metallic body of the car will be scrapped.