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Budget 2021: Auto scrappage policy announced – What you should know

Finance Minister Nirmala Sitharaman has made the announcement of vehicle scrapping vehicle policy. She made the announcement while presenting the 2021 Budget of the country. While not giving out many details, Ms. Sitharaman said that the new policy will help to phase out old and unfit vehicles in the Indian market.

The new vehicle scrappage policy is estimated to bring Rs 43,000 crore business opportunity by boosting the consumption in the auto industry. The new policy will also help the environment as it will reduce pollution.

As per Sitharaman, the ministry will announce details of the voluntary vehicle scrapping policy to phase out old and unfit vehicles. This will encourage people to phase out old vehicles and buy newer fuel-efficient and environmentally-friendly vehicles. This is how overall pollution will is expected to reduce in the future. The government said that the vehicles will go for a fitness test in the automated fitness centres after 20 years for private cars and after 15 years of use for commercial vehicles.

How will it work?

The new policy will allow customers to go for voluntary scrappage of old vehicles. The aim is to simply take out the old and polluting vehicles off the roads and send them to the scrappage yard to make the best out of these vehicles. Vehicles that are older than 15 years will have a reduced resale value nonetheless and they are likely to pollute the environment much higher than the newer vehicles. Scrapping them systematically will allow the scrapyard owners to salvage the parts and make money. The owners of cars will also get monetary help to buy a new vehicle.

This will create a demand for new vehicles in the market and give a major boost to the automobile industries that is one of the main industries in India. The scrapping of the vehicles will also ensure that the metal and other recyclable parts are taken out of the vehicle in a proper manner. This will help the environment too since these parts can be reused to make many different items and can also be used to manufacture new cars.

The new policy will come to effect on 1st April 2022. MoRTH announced the same in a statement. Once the policy comes into effect, India is expected to become a manufacturing hub for automobile brands around the world in the coming years. The details of this scrappage policy and other information will be shared by the Ministry in the coming days or weeks. Since it is a major automobile policy, there is likely to be a separate conference to address the same.

What if you want to keep the car for longer?

In India, vehicles are registered for a period of 15 years and in Delhi-NCR, diesel vehicles are registered for 10 years. If the owners want to keep the vehicle for a longer period, they will need to shell out a lot of money by paying Green Tax. According to the tax, owners may need to pay up to 50% of the road tax of the vehicle every year to keep it legal on the public roads. The green tax depends on the pollution of the cities and it will be lower in the less polluted cities.