What is the New Vehicle Scrappage Policy all about?

What we currently know about the New 2021 Vehicle Scrappage Policy:

There has been a tremendous buzz around the new vehicle scrappage policy announced by the Finance Minister of India, Mrs. Nirmala Sitharam. Ever since the announcement, our office phone lines have lit up like a London street on Christmas eve. People are calling from all parts of the country to discuss the policy and its implications. So we decided to share the information we know.

We have been closely following the development of this policy since its initiation about a decade ago, when it was first called the VVMP Vehicle modernization program. The policy has undergone many changes but the heart of it still remains the same - to reduce environmental pollution caused by motor vehicles and aid the economy by increasing new car sales. We feel this new voluntary scrappage policy may have hit the spot just right.

The primary agenda of the new policy is to clean the environment and increase the domestic generation of scrap in order to reduce imports and thus reduce India's trade deficit. That is of lesser importance to most of our readers though, as most want to know how it impacts them and the cars they own. Here is what we know so far:

• 1. Voluntary Scrappage of Cars

  Car owners can take a breath of relief as the policy does not mandate to scrap their cars post the expiry of registration. The policy has made provisions for those that don't feel the need or desire to part with their old vehicles. A car registration can be extended post expiry as long as it passes a rigorous fitness test.
  

• 2. Age increased to 20 years

  The initial draft policy suggested vehicles get scrapped after 15 years. But keeping the economic disparity of India's car owners in mind, the government wisely increased this to 20 years. This shows concern for the average car owner as they can now derive more value from their cars. Although in Delhi, it may still remain at 15 years as this was directed by the NGT and this policy may not change that. Indians tend to use their cars for a long time, as cars are not seen as disposable items. Anyone remember how long the mighty Ambassador or humble Fiat Padmini ran on the roads? So this policy is good news for us.
  

• 3. Renewing the fitness

  While it sounds relatively easy, renewing the cars fitness has some critical constraints that car owners need to understand before committing to it. The fees as expected are going to be steep - up to 50% of road tax - plus an additional green tax. Cars in cities will pay a higher green tax and diesel cars are unlikely to pass the fitness test.
  But here's a conundrum - most cars that are over 20 years old are Euro 2 or 3; the new act that the government passed in 2019 stated that EURO 2 & 3 cars cannot be re-registered, so what do we do now? Well, we will have to wait and watch.
  

• 4. Incentivizing scrappage of cars

  One reason why this policy got delayed so much is that the government was unable to resolve ways to incentivize the scrapping of cars. In other words, what financial benefits will a car owner get if they scrap their car? This policy does seek to reward car owners with discounts and rebates if they choose to buy a new car post scrapping their old one. The specifics of this incentive scheme will be released soon and we are eager to know all about it.
  This incentive along with the green tax and fitness fees will convince more car owners to just scrap their cars and buy new ones instead of holding on to them. And when you do decide to scrap your car, you know you can count on us!

The scrappage policy explained publicly by Nitin Gadkari:

Conclusion:

The complete details and particulars of the policy are yet to be released. Our honorable Union Minister, Mr. Nitin Gadkari, announced that the policy would be released within 15 days. Obviously, we cannot wait to see what it says.
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