Indian government announces vehicle scrappage policy, aims to generate 35,000 jobs and attract ₹10,000 crore investment

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Indian government announces vehicle scrappage policy, aims to generate 35,000 jobs and attract ₹10,000 crore investment
The new vehicle scrappage policy will incentivise people to scrap their old, unfit and polluting vehiclesPixabay
  • The Indian government today unveiled its vehicle scrappage policy to take old, unfit and polluting vehicles off the road.
  • The policy offers incentives to owners of these vehicles in the form of reduced road taxes and waiver of registration charges on their subsequent vehicle purchase.
  • The government aims to attract investment to the tune of ₹10,000 crore and generate over 35,000 jobs in the process.
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In a virtual address during an investor summit in Gujarat, India’s Prime Minister Narendra Modi announced the Voluntary Vehicle Fleet Modernisation Programme, or the vehicle scrappage policy. This, Modi said, will attract investment to the tune of ₹10,000 crore.

The vehicle scrappage policy has been in the works since 2015. It provides incentives to owners of old, unfit and polluting vehicles to scrap them and make the roads cleaner, and reduce raw material costs for manufacturers.

Union Minister for Road Transport and Highways, Nitin Gadkari, said that this policy has the potential to cut down raw material costs by 40%. This could eventually lead to a reduction in prices of vehicles for customers.

The scheme will be kickstarted with government vehicles that are 15 years and older, by April 2022. It will be expanded to unfit heavy commercial vehicles from 2023, and personal vehicles older than 20 years will be covered from June 2024.

Buyers can expect discounts, other incentives



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Automobile customers can also expect some rationalisation in the prices of vehicles, but the extent of benefits that the manufacturers pass on to buyers eventually is not known yet.

“The association of automobile manufacturers is also going to offer some discount on the purchase of new vehicles and the certificate of deposit for the scrapped vehicles,” said Giridhar Aramane, secretary in the Ministry of Road Transport and Highways.

In addition to this, Aramane added that buyers will benefit from a 25% reduction in road taxes, and a complete waiver of registration fees when purchasing a new vehicle next time.

Vehicle scrappage policy to benefit various stakeholders



The government believes that this policy will help generate employment for 35,000 people at vehicle fitness centres and scrapyards.

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A Grant Thornton report dated August 11 said that this policy will result in benefits for several sectors.

"Be it generating employment, reducing pollution, or accelerating demands for electric vehicles, the policy proves to be a win-win situation for the auto industry and various other stakeholders," the report said.

The report added that the metal recycling business will be one of the major gainers.

"One of the key opportunities that will emerge from the vehicle scrappage policy will be for the metal recycling business. It will also to an extent reduce the cost of production. Steel is a crucial component for automobile manufacturers, and its price has been growing up to almost 30% in the last six months," said Saket Mehra, Partner and Automotive Sector Leader, Grant Thornton Bharat.

Scrapping industry unorganised in India



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Stating that the scrapping industry in India is unorganised and uses manual labour to dismantle machinery, Aramane said that this leads to serious economic loss.

Official estimates suggest that there are over 10 million motor vehicles in the country, which are either older than 15 years or don’t have fitness certificates.

“We want to modernise this process through a modern automated scrapping centre where vehicles will be deregistered before scrapping with the help of regional transport offices (RTOs), component by component, which can generate better value. This will reduce raw material costs, increase the availability of raw materials such as rare earths and other metals,” Aramane added.

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