Presenting the Union Budget 2021, Finance minister Nirmala Sitharaman announced the much-awaited “Vehicle Scrappage Policy". Soon after, Union Minister for Road, Transport and Highways Nitin Gadkari revealed the details in a Lok Sabha session and notified the new vehicle scrappage policy mentioning that the full roll-out of the policy will take place in the coming days. While nothing much has happened at that front, MoRTH has now recommended a reduction in the road tax imposed for the registration of a new car, rather than a vehicle scrapping certificate.
In the earlier mentioned draft notification, is was being mentioned that any vehicle undergoing scrapping will receive a certificate, which can be used to avail benefits on new vehicles. Now the ministry has proposed a reduction in road tax of up to 25% for personal vehicles and up to 15% for commercial vehicles.
As per the draft notification issued by the Ministry of Road Transport and Highways, a vehicle that is registered against the submission of a “Certificate of vehicle scrapping" will become eligible to receive a concession in the motor vehicle tax of up to 25%. For transport vehicles, a concession of up to 15% in the road tax is valid.
Much like the western countries, the scrappage policy comes into effect when a vehicle’s lifecycle is complete. In general, a passenger vehicle has a life of 20 years and a commercial vehicle has a life of 15 years, after which they become obsolete and also starts polluting the environment at a greater intensity than they would have been doing earlier.
In western countries, these old vehicles are sent to scrapyards where they are dismantled and the steel used for making the body is crushed and recycled again. In India though, there’s no such policy. Most of the vehicles either are on run currently polluting the environment or are lying at road sides.
As explained above, a vehicle should be scrapped at the end of its lifecycle so that they are stopped running on roads that will reduce air pollution. Also, getting off older vehicles will generate space for new vehicles, which will boost the sales in the otherwise battered and bruised Indian auto industry.
While more details, such as incentives and monetary benefits will be disclosed once the policy is rolled out, Nitin Gadkari has given following financial benefits one can get from the policy-
1) A scrap value of the ex-showroom price of vehicle ranging from 4-6% will be given to the owner if they choose to scrap the vehicle
2) A rebate of upto 25% will be given in Road Tax
3) Vehicle manufacturers will be advised to give 5% discount on new vehicles against a scrapping certificate
Industry experts are saying that in order to implement this policy successfully govt will have to offer good incentive scheme, else owners will flout the rules in hope of saving money.
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