Scrappage Policy proposes setting up of PPP-based registered scrapping centres

The Scrappage Policy announcement is in-line with the government vision to make scrap recycling an organised sector. Ministry of Mines has recently issued National Non-Ferrous Metal Scrap Recycling Framework, 2020 covering key non-ferrous metals like Aluminium, Copper, Zinc and Lead. The framework has been released with an objective to promote formal and well-organised recycling ecosystem, quite similar to the Scrappage Policy.
Scrappage Policy proposes setting up of PPP-based registered scrapping centres
Minister for Road Transport and Highways, Nitin Gadkari announced the Vehicle Scrapping Policy in Lok Sabha. The Minister said that older vehicles pollute the environment 10 to 12 times more than fit vehicles. The Ministry of Road Transport and Highways is introducing the Voluntary Vehicle-Fleet Modernization Program (VVMP) or ‘Vehicle Scrapping Policy’ which is aimed at creating an ecosystem for phasing out of unfit and polluting vehicles.

The objectives of the policy are to reduce population of old and defective vehicles, achieve reduction in vehicular air pollutants to fulfil India’s climate commitments, improve road and vehicular safety, achieve better fuel efficiency, formalise the currently informal vehicle scrapping industry and boost availability of low-cost raw materials for automotive, steel and electronics industry.

The ecosystem is expected to attract additional investments of around Rs 10,000 crore and 35,000 job opportunities. The Ministry shall, in the next few weeks, publish draft notifications, which shall be in the public domain for a period of 30 days to solicit comments and views of all involved stakeholders.

Fitness criteria
The criteria to determine fitness of a vehicle is primarily based on the Automated Fitness Centres in case of commercial vehicles and non-renewal of registration in case of private vehicles. This criterion is adapted from international best practices after a comparative study of standards from various countries like Germany, UK, USA and Japan. A vehicle failing the fitness test or failing to get a renewal of its registration certificate will be declared as End-of-Life-Vehicle. Emission tests, braking, safety equipment, among many other tests which are as per the Central Motor Vehicle Rules, 1989, will determine vehicle fitness.

What does Scrappage Policy propose?
  • Commercial vehicles be de-registered after 15 years, if failed to get the fitness certificate. As a disincentive measure, increased fees for fitness certificate and fitness test may be applicable for commercial vehicles 15 year onwards from the date of initial registration.
  • Private vehicles be de-registered after 20 years if found unfit or in case of a failure to renew registration certificate. As a disincentive measure, increased re-registration fees will be applicable for private vehicles 15 year onwards from the date of initial registration.
  • All vehicles of the government vehicles including Central, State, Municipal Corporation, Panchayats, State Transport Undertakings, PSUs and autonomous bodies with the Union and State Governments may be de-registered and scrapped after 15 years from the date of registration.
  • The scheme shall provide strong incentives to owners of old vehicles to scrap old and unfit vehicles through registered scrapping centres, which shall provide the owners with a Scrapping Certificate. Some of these incentives include:
  • Scrap Value for the old vehicle given by the scrapping centre, which is approximately 4-6 per cent of ex-showroom price of a new vehicle.
  • The state governments may be advised to offer a road-tax rebate of up to 25 per cent for personal vehicles and up to 15 per cent for commercial vehicles.
  • The vehicle manufacturers are also advised for providing a discount of 5 per cent on purchase of new vehicle against the scrapping certificate.
  • In addition, the registration fees may also be waived for purchase of new vehicle against the scrapping certificate.

PPP-based Registered scrapping centres
The Ministry of Road Transport and Highways will promote setting up of Registered Vehicle Scrapping Facility (RVSF) across India and will encourage public and private participation for opening up of such centres. Efforts are also being made to set up Integrated Scrapping Facilities across India. Some of the identified places include Alang in Gujarat, where it is being planned to develop a highly specialised centre for scrapping, among many other potential centres, where different scrapping technologies can be synergised together.

With a simplified registration process through single window, the scrapping facility shall have to comply with environmental and pollution norms and with all applicable acts of law. It shall be ensured that the scrapping centres have adequate parking facility, de-pollution equipment for air, water and sound pollution and adequate facilities for hazardous waste management and disposal. Similarly, the Ministry shall promote setting up of automated fitness centres on a PPP model by state government, private sector, automobile companies etc.

These centres may have adequate space for test-lane, IT servers, parking and free movement of vehicles. To avoid conflict of interest, operators of fitness centres shall only provide testing facility and shall not provide repair/sale of spare services. Appointment for fitness centres may be booked online and tests reports shall also be generated in an electronic mode. 

The tentative timelines for the proposed Scrapping Policy is as follows:
  • Rules for Fitness Tests and Scrapping Centres: 01st October 2021
  • Scrapping of Government and PSU vehicles above 15 years of age: 01st April 2022
  • Mandatory Fitness Testing for Heavy Comm. Vehicles: 01st April 2023
  • Mandatory Fitness-Testing (Phased manner for other categories): 01st June 2024
The Ministry of Mines has recently issued the National Non-Ferrous Metal Scrap Recycling Framework, 2020 covering key non-ferrous metals like Aluminium, Copper, Zinc and Lead. The framework has been released with an objective to promote formal and well-organised recycling ecosystem in the country which is currently highly unorganized with heavy dependence on imported scrap. Also, it aims to produce high quality scrap for quality secondary production thus minimizing the dependence on imports and encourage economic wealth creation, job creation and increased contribution to GDP through metal recycling.

Industry take
Welcoming the announcement, Anil Kumar, Managing Director, SEG Automotive, states, “Voluntary Vehicle Scrappage Policy which aims to reduce vehicular pollutions, and unsafe vehicles on road. The policy is in the right direction and we expect the policy to create enhanced demand across the automotive industry and especially in commercial vehicle segment which has been badly affected over the last two years. The policy provides a boost to associated manufacturing and services sector, and also ensures availability of low-cost raw materials for the manufacturing sector. Overall, the policy creates a circular economy and will drive growth in the Indian automotive industry.

Meanwhile, many are worried over effect of the policy of CV industry. CV demands have contracted from long and the policy launch will help improve the demand. Small owners will suffer due to change as many old CVs will be scrapped after the notification of the policy. Associations like ACMA has already raised alarms for the CV industry. However, ACMA leadership also believed that everyone shall consider wider goal of making nation pollution free and this is among several steps that the government will take to ensure that.

Vinkesh Gulati, President, The Federation of Automobile Dealers Associations (FADA), says, “The Indian automobile industry has already upgraded to one of the most advanced emission standards. While the new vehicles will be least polluting, vehicles that are older create enormous pollution with the least safety standards. They are now eligible for scrappage thus making roads safer and air cleaner."
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