Budget 2021 will push 6.8 million vehicles to fitness tests, possible scrappage

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Budget 2021 will push 6.8 million vehicles to fitness tests, possible scrappage
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  • The much-awaited vehicle scrappage policy could phase out 6.8 million old and unfit vehicles.
  • The BSE Auto Index surged nearly 950 points after FM Nirmala Sitharaman announced the voluntary vehicle scrappage policy to phase out old automobiles.
  • The policy will retire cars older than 20 years and commercial vehicles older than 15 years.
  • The policy promises to help infuse fresh investments worth ₹10,000 crore and add 50,000 new job opportunities.
At the Union Budget 2021 today, the Finance Minister Nirmala Sitharaman announced the much-awaited vehicle scrappage policy to phase out 6.8 million old and unfit vehicles.

The policy promises to help infuse fresh investments worth ₹10,000 crore and add 50,000 new job opportunities. While addressing the parliament, Sitharaman said that the Road Transport and Highways Ministry would share the details soon.

Scrapping these vehicles will reduce population of old and defective vehicles, 25-30% reduction in vehicular air pollutants and improve road safety.

Minister for Road Transport and Highways Nitin Gadkari while addressing the media

He further explained that nearly 34 lakhs light motor vehicles are older than 15 years and 51 lakhs light motor vehicles are older than 20 years. Moreover, there are 17 lakh medium and heavy commercial vehicles older than 15 years without valid fitness certificates.
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Under the scrapping policy, 51 lakhs light motor vehicles that are more than 20 years old will be scrapped. This will boost the automobile industry

Nitin Gadkari

The markets have welcomed this move, with the BSE Auto Index surging nearly 950 points post the announcement.

Budget 2021 will push 6.8 million vehicles to fitness tests, possible scrappage
Business Insider India

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The government will offer financial or tax-based benefits to consumers who choose to scrap their old vehicle and purchase new vehicles.

Move aims to boost demand and cut down on metal imports



Apart from environmental concerns, the policy is also aimed at increasing demand in the market. That is why the centre has proposed OEM's to offer certain discounts on the new vehicles purchased after scrapping an old one.

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The lobby for vehicle retailers has lauded the announcement of the policy, though voluntary to phase out old vehicles.

If we take 1990 as the base year, there are approximately 37L CVs and 52L PVs eligible for voluntary scrappage. As an estimate, 10% of CV and 5% of PV may still be plying on the road. We still need to see the fine prints to access the kind of incentives which will be on offer and thus have a positive effect on retail.

Vinkesh Gulati, President, Federation of Automobile Dealers' Associations (FADA)

Budget 2021 will push 6.8 million vehicles to fitness tests, possible scrappage
Business Insider India

The policy will also reduce the dependency on steel imports as the steel and other metal deposits from the scrapped cars will minorly be cutting down the metal imports year by year.

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An extension of this policy to other aspects (eg- tyre scrappage) may help boost demand in related sectors while also helping India become more Atmanirbhar.

Vinay Raghunath, Partner and Automotive sector leader, EY India

How can this policy benefit the vehicle owners?



With the resale value of vehicles beyond 15-20 years being extremely low, this policy will provide monetary compensation to owners for sending those vehicles to the scrapyard. The other benefit being that the government is still mulling is for automakers to offer incentives to new buyers for scrapping their old vehicles.

SEE ALSO:

Budget 2021: FM proposes voluntary vehicle scrappage policy to phase out old automobiles

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Checkout India’s budget 2021 key Highlights

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