Finance Minister Nirmala Sitharaman has announced a voluntary vehicle scrappage policy under the Indian Union Budget 2021-22. For starters, the vehicle scrappage policy helps consumers in phasing out their old vehicles and replacing them with new ones. In order to promote this, the Government offers benefits to the consumers on the new vehicles that they have purchased as they get rid of the older ones. The key idea behind the Vehicle Scrappage Policy is to reduce air pollution as older vehicles emit much higher emissions compared to the new ones, which is also thanks to the new and stricter emission norms.
Moreover, the vehicle scrappage policy will also pave the way for the higher adoption of electric vehicles as EVs are the future! Under the Voluntary Vehicle Scrappage Policy, a fitness test will be conducted after 20 years in the case of personal vehicles and after 15 years in the case of commercial vehicles. More details on the Voluntary Vehicle Scrappage Policy will be announced by the Ministry of Road, Transport, and Highways (MoRTH) soon. The new vehicle scrapping policy will be implemented in India starting April 2022 and the policy notification will likely be announced soon before being implemented from the said timeline.
The just-announced vehicle scrappage policy is claimed to bring Rs 43,000 crore business opportunity by boosting consumption in the auto industry and helping the environment. The Government of India had also proposed a new Green Tax policy under which transport vehicles older than 8 years could be charged at the rate of 10 to 25 % of road tax at the time of renewal of fitness certificate. Similarly, personal vehicles will be charged Green Tax at the time of renewal of Registration Certification after 15 years. City buses and public transport vehicles would attract a lower Green Tax and on the other hand, electric vehicles, full hybrid vehicles along with CNG, ethanol, LPG powered vehicles along with farm equipment would be exempted from the Green Tax. Also, the said tax rate would be different for petrol and diesel vehicles.
Speaking on the announcement of vehicle scrappage policy, Rajeev Singh, Partner, Automotive Leader, Deloitte India said, “We welcome the announcement on voluntary scrappage policy and it’s likely to increase demand for new commercial vehicle (CV)and Passenger vehicles(PV). Scrappage policy though voluntary will likely become mandatory as fitness certificate will be made mandatory. It’s a soft step towards coming up with mandatory. In dearth of a proper infrastructure, just introduction of a fitness certificate may not be enough. The government will also need to build the necessary infrastructure to get this to action onground. Strong push in Infrastructure building – roads, railways, economic corridors will help boost demand for heavy & medium duty CV’s”.
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