Vehicle Scrappage Policy in India

The Vehicle Scrappage Policy was introduced with the aim to remove unfit and polluting vehicles. The Government of India rolled out the Vehicle Scrappage Policy to phase out unfit commercial vehicles and private vehicles older than 15 years. Read on to know everything about the vehicle scrapping policy, its benefits, its impact on car insurance, and RTO rules for scrapping.Read more

What is the Vehicle Scrappage Policy?

The Vehicle Scrappage Policy is an initiative by the Government of India to phase out old, unfit and highly polluting vehicles in a systematic and environmentally responsible manner. If your vehicle is older than 15 years, you will either have to get a fitness certificate based on a fitness test or get the vehicle scrapped. According to sources, nearly 4 lakh vehicles have been scrapped till December 2025 in India. This initiative helps to officially scrap and then recycle old vehicles through certified Registered Vehicle Scrapping Facilities (RVSF).

Benefits of a Vehicle Scrappage Policy 2021

The vehicle scrap policy offers the following benefits:

• The scrapping of unfit vehicles will lead to less air pollution and improved air quality.
• This policy will benefit the entire automobile sector, resulting in increased job opportunities in scrapping centres.
• Vehicle owners will also benefit from this policy, as they will receive a 25% tax rebate on newly purchased private cars and a 15% rebate on commercial vehicles when they scrap old vehicles.
• The vehicle scrap policy in India will also result in the growth and reorganisation of the recycling market.
• Since the old vehicles will be scrapped, the demand for new cars is also expected to increase. Moreover, the newly built vehicles will also be comparatively safe and secure.
• The government also believes that vehicle scrappage will help in recycling critical materials, such as steel, lead, aluminium, platinum, and palladium, which are otherwise largely imported, and will help reduce their imports.

Key Factors of the Vehicle Scrappage Policy

Under the vehicle or car scrap policy, all heavy commercial vehicles older than 15 years and private vehicles older than 20 years must be tested for fitness at authorised Automatic Testing Stations (ATS). Under this policy, a vehicle will be scrapped if it does not pass the vehicle fitness test and get a vehicle fitness certificate. It will be considered an End-of-Life Vehicle (ELV).

The major highlights of the Vehicle Scrappage Policy include the following:

• The policy aims to set up an automated system to scrap unfit bikes, cars and commercial vehicles.
• The scrapping of old and unfit vehicles is done to reduce pollution levels, especially in specific areas and promote sustainability.
• Vehicle owners who opt for this policy will also get certain benefits.
• All the laws and regulations laid down under the policy will come under the purview of the Ministry of Road Transport and Highways (MoRTH)

Incentives Offered Under Vehicle Scrappage Policy

Mentioned below are the incentives for vehicle owners for scrapping old vehicles in India:

• The vehicle owner is liable to receive a discount of 4 to 6% offered by the manufacturer on the new vehicle's ex-showroom cost after scrapping the old vehicle.
• Once the Deposit Certificate is declared, the registration fee for the new vehicle is waived.
• A concession of 25% on road tax is also offered by the Government on the scrappage of old vehicles.
• The manufacturers also provide a 5% discount on new vehicle purchases by submitting the Certificate of Deposit.

Scrappage Policy for Different Types of Vehicles

Check out the categorisation of vehicles under the vehicle scrappage policy. Take a look:

1. Private Vehicles Vehicles used for personal purposes fall under this category. All private vehicles driven in India undergo fitness tests after 20 years. If your vehicle fails, it will be scrapped.
2. Commercial Vehicles Vehicles such as buses, trucks, etc., used for business purposes fall under this category. A commercial vehicle needs to go through a fitness test once it completes 15 years. If the vehicle is found unfit, it will be thrown away.
3. Vintage Vehicles Since vintage vehicles are driven less frequently and are well-maintained, the vehicle scrappage policy usually does not apply to them. Vintage vehicles are exempt from this policy.
4. Government Vehicles Vehicles that are owned by the State and Central Government and are over 15 years old will have to undergo scrapping.

Fitness Test for Different Types of Vehicles

An RTO conducts a fitness test for different categories of vehicles under the scrappage policy. Here are important things to note about a fitness test:

• A fitness test refers to a detailed inspection of a vehicle that determines whether a vehicle is fit to be driven beyond a given lifespan.
• This test is also conducted to renew the car fitness certificate.
• This test also states whether a particular vehicle is increasing environmental pollution.
• Just like the PUC test, a vehicle's fitness test will be conducted through registered Automated Testing Stations.
• A green cess of 10 to 15% or more can be levied on road tax for old cars that have passed the fitness test. This tax varies based on the location.
• Once a vehicle has failed the fitness test, this means its registration cannot be renewed.
• Vehicles that fail the fitness test will have to be either scrapped or repaired to pass the fitness test.

How to Scrap a Vehicle in India?

The scrapping of vehicles shall be carried out by a registered Vehicle Scrapping Facility in India by the following procedure:

• Once the primary registration of a vehicle has expired, the owner can go to a registered vehicle scrapping centre nearby and surrender the vehicle for scrappage.
• Complete the documentation and submit the documents required by the scrappage centre.
• The fitness test will judge the quality of the vehicle and whether it is fit to be driven on the roads.
• If the vehicle fails the fitness test, it will have to be scrapped. The recycler will then start the scrappage test by removing all the parts of the car one by one.
• The remaining parts of the vehicle will be recycled, reused or sold.
• Once the car is fully scrapped, the vehicle owner will be issued a 'certificate of destruction'. This certificate can be used to deregister the vehicle at the respective RTO. The scrap value will be paid to the vehicle owner digitally or via cheque.

Fee for Renewing Vehicle Registration Certificate

Below is the fee structure for conducting the test of a vehicle to grant or renew the fitness certificate:

Note: The above fee is decided by the Ministry of Road Transport and Highways (MoRTH) and is subject to change without prior notice.

RTO Rules for Scrapping Old Cars in India

Mentioned below are the RTO rules for scrapping cars in India:

• The car owner will have to write a letter to the concerned RTO stating the scrapping of the car.
• A confirmation of the scrap dealer on letterhead with the complete address and scrap pictures should also be submitted
• The vehicle owner will have to surrender the original Registration Certificate of the car, along with the VIN plate cut out, after the vehicle is scrapped.
• An affidavit has to be submitted by the car owner stating that the vehicle is not under hypothecation, car insurance claims or pending traffic challans. It should also say that the vehicle was not involved in theft cases.

Impact of Vehicle Scrapping on Car Insurance

Here is how vehicle scrapping impacts your car insurance:

• If you are scrapping an old car, you are required to cancel your car insurance policy and do not have to pay any premium at all.
• Unfit cars also contribute to an increase in the Incurred Claim Ratio of the car insurance company. With the scrapping of old vehicles, the calculated ICR is also expected to reduce.
• With proper access to recyclable materials like copper, aluminium, steel, and plastic, the manufacturer's cost of the cars may be reduced.
• With the reduction in the new car prices, the car insurance cost may also reduce as the current market value determines the IDV of the car, thus affecting insurance prices.

Wrapping Up!

Scrapping cars that are not fit for Indian roads will not only have a positive impact on the environment, but it will also be beneficial for the automobile sector and vehicle owners, as it can offer them a discount on the purchase of a new car. This also reduces car insurance costs.