Vehicle Scrappage Policy in India: All You Need to Know

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With an aim to phase out unfit and polluting vehicles, the Government of India has rolled out Vehicle Scrappage Policy 2021 in India. The main objective of the policy is to replace old and unfit private cars and commercial vehicles older than 15 years old with new and clean vehicles. Read further to know more about this policy in detail.

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      Highlights of the Vehicle Scrappage Policy

      Under the vehicle scrap policy of 2021, all heavy commercial vehicles will be tested for fitness at authorised Automatic Testing Stations starting from 1st April 2023. While for other commercial and private vehicles, the fitness testing will begin on 1st June 2024.

      Under this policy, vehicles that are more than 15 years old, will be scrapped if they do not pass the vehicle fitness test. A vehicle failing the fitness test shall be considered an End-of-Life of Vehicle (ELV).

      The major highlights of this policy include the following:

      • The policy aims to set up an automated system to scrap unfit bikes, cars and other commercial vehicles.
      • The scrapping of old and unfit vehicles is done to reduce pollution levels, especially in specific areas.
      • Vehicle owners who opt for this policy will also get certain benefits under this policy.
      • All the laws and regulations laid down under the policy will come under the purview of the Ministry of Road Transport and Highways (MoRTH)
      • This policy will also pave the way for people to buy eco-friendly, technologically advanced and safe vehicles in the coming years.

      Benefits of a Vehicle Scrappage Policy 2021

      The Car scrap policy benefits the automobile sector as a whole including the vehicle owners. Mentioned below are some key benefits of this policy:

      • 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 tax rebate of 25% for newly purchased vehicles by scrapping 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 will also increase under this policy. Moreover, the newly built vehicles will also be comparatively safe and secure.

      Vehicle Categorization Under the Scrappage Policy

      Diverse types of vehicles ply on Indian roads and this diversification has led to separate scrappage rules for each type of vehicle. Below is the categorisation of vehicles under the Vehicle scrappage policy. Take a look:

      Private Vehicles

      Private cars and bikes that are used by the public for their private purposes come under this category. All private vehicles driven in India will have to undergo fitness tests after 15 years. If failed, the vehicle will be scrapped.

      Commercial Vehicles (CVs)

      Vehicles such as buses, trucks, etc used for commercial reasons come under the CV category. Under the scrappage policy, a commercial vehicle needs to go through a fitness test once it completes 15 years. After 15 years, if the vehicle is found unfit, it will be scrapped.

      Vintage Vehicles

      Since vintage vehicles are driven less frequently and are well-maintained, the vehicle scrappage policy will not apply to these vehicles.

      Government Vehicles

      Vehicles that are owned by State and Central Government come under this category. All Government vehicles that are more than 15 years will have to undergo scrapping. This policy will start scrapping Government vehicles from April 1 2023, after a notification released by the MoRTH.

      Fitness Test for Different Vehicles Under the Scrappage Policy

      Below are the key points of a fitness test conducted for different categories of vehicles under the scrappage policy:

      • A fitness test refers to a detailed inspection of a vehicle that determines its roadworthiness that is whether a vehicle is fit to be driven beyond a given lifespan.
      • 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.
      • Green cess of 10 to 15% can be levied on road tax for old cars that have passed the fitness test. This tax may vary as per the location.
      • Once a vehicle has failed the fitness test, this means its registration cannot be renewed.
      • The validity of a vehicle fitness test will be for 5 years after which it has to again go through fitness tests.
      • Vehicle owners whose vehicles fail the fitness test will have the option to scrap the vehicle. However, they can also get it repaired to pass the fitness test.

      You May Also Read: Vehicle Fitness Certificate For Cars

      Process of Vehicle Scrapping 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 de-register the vehicle at the respective RTO. The scrap value will be paid to the vehicle owner digitally or via cheque.

      Incentives Offered Under Vehicle Scrappage Policy 2021

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

      • The vehicle owner is liable to receive a discount of 4 to 6% 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 of a vehicle are also to provide a 5% discount on new vehicle purchases on producing the Certificate of Deposit.

      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 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, insurance claims or pending traffic challans. It should also say that the vehicle was not involved in theft cases.

      Affect of Vehicle Scrapping on Car Insurance

      Car scrapping also has an impact on car insurance. Here is how:

      • Driving an unfit and old car increases the chances of road mishaps enhancing the liability of your motor insurance provider. On the other hand, scrapping an old car will require you to cancel your car insurance policy and not have to pay any premium at all.
      • Unfit cars also contribute to an increase in Incurred Claim Ratio of the 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 reduce.
      • With the reduction in the new car prices, the insurance cost may also reduce as the current market value determines the IDV of the car thus affecting insurance prices.

      You May Also Read: Estimate Car Insurance Premium using a Car Insurance Premium Calculator

      Wrapping Up!

      Scrapping cars that are not fit for Indian roads will have a positive impact on the environment. Not only this it is also beneficial for the automobile sector and vehicle owners as it can offer them a discount on the purchase of a new car and thus car insurance costs will also reduce.

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