Scrappage Policy to turn mandatory

May boost demand for new vehicles

Steel Insights Bureau

The government has released the much awaited voluntary scrappage policy under which commercial vehicles beyond 15 years old and which fail to obtain a fitness certificate from automated fitness centres, will be de-registered and declared as end-of-life vehicles.

For private vehicles, the same rule will be applicable to vehicles over 20 years old.

Direct incentives under the policy include a scrap value for old vehicle (ranging between 4-6 percent ex-showroom price of a new vehicle), 5 percent discount on the purchase of a new vehicle against the scrapping certificate and registration fee waiver.

Additionally, there could be road tax rebates of up to 25 percent for passenger vehicles and up to 15 percent for commercial vehicles (as advised to state governments). Voluntary scrappage policy is aimed at curbing pollution, replacing the existing fleet of less fuel-efficient vehicles and increasing road safety.

The government's intent to support old vehicle owners though lower taxes and a probable GST rate cut. Moreover, with mandatory fitness testing for heavy commercial vehicles starting April 2023, adhering to global standards, we feel that voluntary nature of policy will convert into a mandatory nature, providing the long term solution for the industry, environment and road safety, ICICI Securities said in a report.

The government's initiative of mandatory scrapping its owned vehicles (at state, Centre as well as PSU level) over 15 years old starting April 2022 also depicts its positive intent and will support industry growth in the interim period, the report said.

Impact on demand