Scrappage policy: Modi asks start-ups, MSMEs to grab auto recycling biz

'Circular economy being created will cut costs and pollution'

By:August 14, 2021 7:50 AM

Prime Minister Narendra Modi on Friday launched the voluntary vehicle scrapping policy, which will be rolled out in phases starting from April 2023 and will take full effect by late 2024 or early 2025. The move could give a leg-up to India’s high-growth automotive industry and the downstream units that rely on it, boost consumption demand and help cut vehicular air pollution.

Modi said the policy would give “a new identity to India’s mobility and its auto sector”, besides promoting a ‘circular economy’, where products are designed for durability, reuse and recyclability.

Addressing an Investor Summit held in Gandhi Nagar to invite investments in vehicle scrapping infrastructure via video conference, the prime minister urged the youth and start-ups to join the progamme. “The policy will create thousands of jobs,” he said.

According to the government’s estimate, the policy will help bring in more than Rs 10,000 crore in fresh investments in the setting up of 450-500 automated testing units and 60-70 scrapping centres across the country. Seven companies, including Tata Motors, are learnt to have already signed initial pacts with the Gujarat and Assam governments to set up businesses in the area.

According to the government, the Voluntary Vehicle Fleet Modernisation Programme will enable Indian auto industry to take its turnover to Rs 10 lakh crore (in a few years) from Rs 4.5 lakh crore at present, while availability of scrapped material could reduce the cost of auto components by 30-40 per cent. Besides, a new vista of opportunity will be opened up for new small and medium-sized businesses in the organised sector, given the testing and scrapping infrastructure required.

Under the proposed policy, all personal vehicles will have to undergo mandatory fitness test after 20 years to ply on the roads while commercial vehicles will have to pass the test after completion of 15 years. On failure to obtain the fitness certificate, the vehicle would be impounded by the transport authorities, declaring it as ‘end of life vehicle’. For commercial vehicles above the prescribed age threshold, mandatory fitness test and re-registration will be required from April 2023 onwards and the regime will kick in for personal vehicles in phases from June 2024 onwards.

Minister for road transport and highways Nitin Gadkari said investors in fitness and scrapping infrastructure will be given single-window clearance and the process will be completely online. All declaration will be on self-certification basis. “Cluster-approach could be adopted. Financial help to encourage investment from different government schemes could also be looked at,” he said.

We want to make the policy transparent, time-bound and result-oriented. It will urge the states to devise suitable policies to attract MSME investments in the emerging sector. There should be at least one automated testing center and one scrapping centre in each of India’s 718 districts,” Gadkari said.

Gadkari said the policy will help India to become an industrial hub of automobile manufacturing. The recycling of the materials could lead to around 40 per cent cut in raw material costs which will, in turn, lead to an increase in automobile sales. The increased sales will lead to around Rs 30,000-40,000 crore additional GST collection (per year) For the Centre and the states combined.

A carrot-and-stick approach is to be followed under the policy, whereby scrapping of ‘old vehicles’ (those that passed the thresholds mentioned above) will be promoted with assorted incentives: Scrap value at 4-6 per cent of ex-showroom price of new vehicle, 5% discount on purchase of new vehicles, road tax rebate by states, at the rate of 25 per cent for personal and 15 per cent for commercial vehicles and waiver of registration fee for new vehicle purchased on scrapped vehicles.

Also, there will be disincentives and penalties for non-compliance: Hike in registration and fitness certificate renewal fees, stiff penalties for delay in renewals, green tax by states, and, of course, mandatory automated fitness test and de-registration for the old vehicles failing to pass the mandatory fitness test.

If fitness and its registration certificates are renewed, a private vehicle can ply on the roads even after 20 years of first registration and a commercial vehicle beyond 15 years. However, increased fitness fees and re-registration charges would act as a deterrent for an owner to retain old vehicle.

The government had earlier said an estimated 51 lakh vehicles are there in the country which are older than 20 years, 34 lakh vehicles more than 15 years old and 17 lakh older than 15 years, without renewed fitness certificate. Such vehicles are seen to pollute air 10-12 times more compared to vehicles that are fit, besides being unsafe for use.

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