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PM Modi launches vehicle scrappage policy: What it means for private car owners.

The new vehicle scrappage policy, unveiled by Prime Minister Narendra Modi on August 13 and aimed at recycling old and unfit vehicles, is expected to draw investments of around Rs 10,000 crore and give impetus to the circular economy. Here is what the policy entails.

Prime Minister Narendra Modi launched the much-awaited vehicle scrappage policy on August 13, during his virtual address at the Investor Summit in Gujarat.

The ‘Voluntary Vehicle Fleet Modernisation Programme,’ also known as the automobile scrappage policy, is expected to generate investments of around Rs 10,000 crore, Modi said, adding that the incumbent method of scrapping of materials was not productive.

Union Minister for Road Transport & Highways Nitin Gadkari, who was also present when Modi launched the new policy, said the move is likely to lead to a cut in raw material costs by around 40 percent.

As the government rolls out the new vehicle scrappage program, here is an explainer on what the policy entails.

What does the policy aim to achieve?

The idea is to phase out cars and commercial vehicles older than 20 or 15 years, respectively. This is being done to reduce urban pollution levels and galvanize automotive sales, which continue to suffer during India’s post-COVID recovery phase. This means that any private vehicle older than 20 years will have to undergo a fitness test. According to the Finance Minister, a fitness test will be conducted at automated fitness centers, determining whether the vehicle in question is qualified to run on roads or headed for the scrap heap.

How does the fitness test work?

According to the new policy guidelines, a vehicle will undergo a fitness test after the accepted 20-year period. While it’s possible for the car to pass a fitness test and acquire a fitness certificate, each fitness test would cost approximately Rs 40,000, as media reports claimed earlier this year. This is in addition to the road tax and possible “Green Tax” that you have to pay while mandatorily renewing your private vehicle’s registration after the 15 years. Each fitness certificate is applicable for five years, after which the owner of the vehicle will be required to get another fitness test, costing the same. The financial cost of keeping a car in road-ready shape alone would then dissuade the owner from constantly renewing the certificate.

Are there any other costs involved?

Yes. The government has proposed a Green Tax, which requires you to pay 10-25 percent of your road tax every time you renew your fitness certificate. This means that, in addition to the fee you’re required to shell out for the test, you have to pay a considerable sum, which differs from city to city, based on their pollution levels. In the Delhi-NCR region, for example, the Green Tax, if implemented, would require the customer to pay 50 percent of the road tax upon renewal of registration.

What happens if your vehicle does not pass the fitness test?

According to the law, it is illegal to drive a car that hasn’t passed a fitness test, as it is considered unregistered. One cannot circumvent a fitness test while going through the mandatory re-registration process, and if the vehicle fails the test, it is simply not registered, making it illegal to drive it on the road. The policy, which will be in effect from April 1, 2022, would also offer a monetary incentive to the owners sending their vehicles to the scrap heap, although if the vehicle fails the fitness test thrice, they wouldn’t be left with much of choice. More details, such as the setting-up scrappage docks/yards, etc., are awaited. Under the proposed policy, over 51 lakh private and commercial vehicles are over 20 years old. Their removal from the roads will urge their owners to buy new vehicles and possibly adopt more recent technologies, like EVs. It will also help bring down vehicular pollution by an estimated 25 percent.

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