Government set to announce vehicle scrappage policy within a month

Automobile owners with ageing, polluting vehicles can now breathe easy for a scrappage policy is on its way in India.

Facilitating this exercise is the Ministry of Road Transport and Highways (MoRTH) which has firmed up a new scrappage policy that will be announced within a month. The policy will enable easier and faster de-registration of vehicles and outlines the key steps to initiate vehicle scrapping.

The draft of the scrappage policy is currently awaiting approval from the Finance Ministry for extending excise duty benefits to the vehicle owner who scraps his or her vehicle for purchasing a new one.

A 50 percent rebate is expected across the board at dealerships (subject to approval by the Finance Ministry) selling cars, two-wheelers, commercial vehicles and three-wheelers. Since these will be additionally bought new vehicles, the financial incentive to the buyer is based on the premise that it will not dent the government’s coffers. 

Meanwhile, MSTC Ltd, a public sector undertaking under the Ministry of Steel, has offered to set up around 5 scrappage collection centres across the country with each centre mustering the capability to scrap about 500,000 vehicles, a government source told Autocar Professional.

The first centre is expected to be operational within two years and is likely to come up in the vicinity of Delhi. The project will involve an investment of around Rs 150-200 crore for each centre and will be spread across a minimum area of about 25 acres.

At present, only the unorganised sector, which primarily constitutes local kabadiwalas, is the key vehicle scrapper in the country. The rudimentary process, often carried out near residential plots, leads to a lot of air as well as noise pollution. Furthermore, as metal scrap is dumped out in the open, it is also a serious health hazard.

MoRTH is now putting together an environment-friendly and professional process of scrappage that will not send existing and fully operational BS-III vehicles to the junkyard immediately. “If the vehicle is roadworthy and running well, there will be no compulsion on the owner to send it to the scrapyard,” says the source.

Only oil guzzlers, polluters and non-operational vehicles will be headed to the metal shredders with the process to be governed by city specific and state-specific regulations. For instance, the National Green Tribunal has been pushing for a ban on 15-year-old vehicles from plying on Delhi-NCR roads or banning 10-year-old diesel vehicles in the region.

Sources say that prior to the year 2000, the number of vehicles on Indian roads were limited and pollution levels in most Indian cities were not as high as they are now. Now with regions like Delhi-NCR experiencing very high levels of pollution and the four-wheeler sector alone contributing about 10 million vehicles, removing polluting vehicles from the roads has become imperative. For automakers, the scrappage policy will also yield new sales and help drive volumes.

All in all, MoRTH is looking to streamline the process of scrappage and put in place a standardised operating procedure that will rest on three main pillars: make de-registration of vehicles easier for which the scrappage policy is being framed, make scrapping vehicles more  environment friendly so that pollutants like lead in batteries are professionally treated and, thirdly, set in motion a recycling process. The shredded steel from the centres will be recycled at steel plants to make high quality steel that will then be used by various industrial sectors like automobiles. Currently this process is not being followed.

Interestingly, once the vehicle owner takes his/her automobile to the scrapping collection centres, he/she will get a scrappage certificate with the intimation being automatically sent to the concerned Regional Transport Office for delisting that vehicle from their registration system.

The Ministry of Road Transport and Highways is also mulling setting up scrapping centres near key ports and even bringing shredded steel from overseas markets to India for use in the steel plants as it is a good catalyst for producing an improved quality of steel. But the process will be market-driven.