NATIONAL AUTOMOBILE SCRAPPAGE POLICY 2021

Reading time : 10 minutes

  1. ABSTRACT

With the rise of automobile users for the past few years, India has witnessed an increase in pollution that is mostly caused due to the emission of harmful gases from vehicles. This unfortunate situation made the Government of India think about a solution that will decrease pollution without barring people from using vehicles. This led to the introduction of the National Automobile Scrappage policy. This scheme aims to pull out the age-old vehicles that emit toxic gases at an increased level from the road and scrap them and use materials for other manufacturing purposes. This scheme is not new to the world as such, it has already been in practice in many countries like the USA, China, Germany, United Kingdom, South Korea, etc. The scheme is successfully running in these countries and people are participating in this venture positively. However, in India, the scheme received a mixed review, some people welcomed the scheme while some people criticized it. This paper tries to analyse what are the major reasons that led the government to adopt this policy and how the policy will run in our country.

As a part of the research, the researcher had analysed news articles by various leading sources pertaining to the research topic and got an idea about both sides regarding the topic and have taken a neutral side throughout the paper.

  • INTRODUCTION

On August 13 2021, the Honourable Prime Minister Narendra Modi launched National Automobile Scrappage Policy, 2021, during the Investor Summit held in Gujarat to make automobile components more competitive and less expensive in the international market.  Launching the policy, the Prime Minister said that the scrappage policy is a significant milestone towards Aatmanirbhar Bharat.[1] Through scrappage policy, all unfit vehicles will be removed from the road; thus, giving a new face and identity to the country’s automobile sector. With this policy, the Government aims to transform our country into a clean country with a congestion-free and convenient path for mobility. The Prime Minister called this drive “Waste to Wealth Mission”. This will enhance the country’s rapid development and economic development through huge investments of about Rs 10,000 crores and increased employment opportunities.

  • WHAT IS AUTOMOBILE SCRAPPAGE POLICY?

The automobile scrappage policy is a policy that targets to scrap old vehicles that are unfit for travelling and cause pollution by emitting toxic gases; by introducing systematic testing of vehicles that have completed the registration period. According to the Motor Vehicles Act, 1988, the validity period of the passenger vehicle and commercial vehicle registration certificate is 15 years and 10 years, respectively.

After completing these 15 or 10 years, the scrappage policy will come into effect, and the vehicles are required to undergo a compulsory fitness test. If the vehicles do not meet the necessary requirement of the test, they will have to be scrapped.

Thus, this policy will help people systematically discard their old vehicles so that they can be used efficiently and productively for other purposes enhancing the reduction of pollution in the environment and boosting the country’s economic sector.

  • WHAT LEAD THE GOVERNMENT TO INTRODUCE A SCRAPPAGE POLICY?

Transportation is a crucial element in maintaining the socio-economic relationships of humankind. It also plays a vital role in connecting people who are separated by a large distance of the geographical area. Mainly there are three modes of transportation: by land, by water and by air. In India, people rely on railways, aviation services, waterways networks and road transport for their transportation. Over the past few decades, the use of road transport has increased in our country. According to the 2011 census, about 21 per cent of households have two-wheelers, whereas 4.7 per cent of households in India have cars or vans.[2] The automobile industry in India is currently rapidly growing, with an annual production of over 4.6 million vehicles, with a yearly growth rate of 10.5%, is expected to rise significantly in the future.[3] However, with the increase of automobiles on the roads of India, the rate of pollution is also increasing at an exorbitant pace. The non-renewable energies used to meet the need for fuel for these vehicles are expensive and also increase the quantity of pollutants in the atmosphere. Also, after using a vehicle for some years, people will gradually attach sentimentally to that vehicle leading them to use it for years. The use of old vehicles is a great threat to the environment and our economic stability; because:

4.1 Global warming

The vehicles that we use every day are one of the primary sources of global warming. Global warming is the phenomenon of increasing the temperature of the earth due to the increased level of Carbon dioxide and other greenhouse gases in the atmosphere. Vehicles emit Nitrogen Oxide, Carbon monoxide and other harmful gases. About 27% of total air pollution in India is caused by vehicles which can cause the premature death of 1.5 million people every year.[4]

The emission from old vehicles is comparatively higher as compared to new models of vehicles. The new model of vehicles is designed with technology to purify the emission of gases, thus preventing the exposure of pollutants such as hydrocarbons, carbon monoxide, nitrogen oxides, etc., to an extent.

4.2 Worse fuel efficiency

In this scenario of increasing fuel price, every vehicle owner is looking at the distance the vehicle can travel on a specified quantity of fuel. The old vehicles consume a higher amount of fuel than new vehicles, thus adding the owner’s expenses. The new model vehicles are manufactured with improved technologies such as lightweight parts, upgraded aerodynamic designs, and low resistance tyres that help the vehicles to travel more distances. Thus, better value for money in terms of fuel efficiency for these vehicles.

4.3 High maintenance & poor safety

New vehicles have basic maintenance packages such as refilling oil for free at certain checkpoints and free service after covering specific kilometres. But this feature is not available for old vehicles. As the vehicle becomes old, its efficiency will decrease, and the need for maintenance and services will also increase, thus leading to increased expenses for the owner.

The safety measures of old vehicles are less than new vehicles. Most of them are causing problems day by day. The introduction of airbags, improved centre of gravity and suspension, warning signs, etc., has helped protect drivers and passengers. The Government is reviewing safety measures every year; as the rules are getting stricter, the manufacturers of vehicles are compelled to be bound by the criteria given by the Government. So, an old vehicle will be less safe since it is not updated with the latest safety measures.

  • GLOBAL WORKING OF SCRAPPAGE POLICY

Automobile scrappage policy is not limited to India but it is already in practice in other major countries like the USA, China, Germany, United Kingdom, South Korea, etc. These counties introduced the scrappage policy as a part of the increasing market and economy after the global recession in 2008. So the policy was introduced by 2009 in all these countries.

 Before the Kyoto Protocol, the countries practised a system to provide tax refunds to those people who purchase a new car with modern standards of emission. But after the Kyoto Protocol, the system was changed to provide incentives for people who support the scrapping of old cars. In the beginning, many countries connected the policy as a part to save the environment by decreasing harmful gases. But later it was narrowed to the economic aspect as the program will boost the automobile sector and the government will get huge tax returns. There are many countries whose economies have rocketed after introducing a scrappage policy. For example  Germany. In Germany, the scheme started in 2009 by giving incentive to people who own a car older than nine years to buy a new car with modern emission standards. After one year, the automobile market witnessed a tremendous hike with increased sales and profits.

Similarly, In China and France, the car market boosted after the introduction of the scrappage policy.  Also, the tax returns of these companies have also increased. India is also trying to follow these examples and expand the economy of the country which had depression after Covid 19.

  • INTRODUCTION OF SCRAPPAGE POLICY IN INDIA

To reduce the harmful impacts that are mentioned above, the Government of India had decided to launch the National Automobile Scrappage Policy in our country. The policy was first presented in the Union Budget 2021-22 by Finance Minister Nirmala Sitharaman to increase the sale of automobiles after withdrawing old and unfit vehicles from roads to reduce air pollution and accidents.

After the announcement of the scrappage policy by the Finance Minister, the Union Minister for Road, Transport and Highways Nitin Gadkari revealed the details of the policy at a Lok Sabha Session. The Minister said that the policy would increase the country’s automobile industry turnover to Rs 10 lakh crore from the current Rs 4.5 lakh crore.[5]

On August 13 2021, the Honourable Prime Minister Narendra Modi launched National Automobile Scrappage Policy, 2021, during the Investor Summit held in Gujarat. The main target of the policy is to reduce India’s oil import bills by improving fuel efficiency, reducing environmental pollution, and improving road and vehicular safety by getting rid of old and defective vehicles, boost the availability of low-cost raw materials like plastic, steel, aluminium, steel, rubber, electronics, etc.[6]

  • WORKING OF SCRAPPAGE POLICY

Not all vehicles will not be scrapped based on age. Instead, they will be made to undergo scientific tests in authorised testing centres. If they are found unfit for travelling purposes, they will be sent to the scrapping unit to get scrapped. This policy works in a series of events:

6.1 Fitness test & following procedures

The vehicles whose registration period has expired are required to pass a fitness test. Vehicles will be tested in authorised testing centres. This test also includes checking of the emission control system, brake and sound system and other safety aspects and the vehicles which fail in these tests will be considered as unfit and are discarded, and their registration will not be renewed. The other categories of unfit vehicles include vehicles that have been damaged due to accidents, natural calamities or burned due to fire and are unable to repair. If an old vehicle passes the test, the owner can continue to use it; however, the charges for re-registration will be very high. Thus, increase the expense of the owner.

However, one retest will be permitted after the necessary repairs are done only if it is allowed by the authority. If it fails again in the re-test, then the vehicle will be declared an end of life vehicle.[7] If a vehicle passes the fitness test, it will have to undergo the test after every 5 years to check its quality.

6.2  Incentives for scrapping old vehicles

The Government has promised to give some incentives to the people who are willing to withdraw their old vehicles from plying on the road and give it for getting scrapped.

  1. Owners will receive a scrap value that will be equivalent to 4 to 6 per cent of the ex-showroom price of the new vehicle they are purchasing in the future.
  2. Zero registration fees for the new vehicle that the owner is purchasing if the certificate of deposit of the old vehicle is shown in the showroom.
  3. 5 percent discount from the on-road price of the new vehicle by the vehicle manufacturers upon showing the deposit certificate.
  4. Concession of Motor Vehicle Tax up to 25 per cent and 15 per cent for non-transport vehicles and transport vehicles respectively by the State Government.
  5. Low maintenance cost and expense for fuel thus, increasing the savings.

6.3 Disincentives for possessing old vehicles

  1. High expenses for owners as cost for renewal of fitness certificate will increase drastically.
  2. In addition to the existing road tax, the state will impose a green tax.

6.4  Benefits of the policy

  1. When the new fitness centres and scrap yards are introduced, 46 thousand people will get employment, and an investment of Rs 15,000 crores will flow to our country’s economy.
  2. Reduction in road accidents and increased protection of the environment from effects from pollution.
  3. Boost in sales in the automobile sector that had shrunk as a result of economic slowdown due to Covid-19 pandemic.
  4. The production cost of vehicle manufacturers will reduce as the raw materials for the manufacturing can be taken from the scraped materials after systematic procedures.

7.       CHALLENGES

The Government assured that the policy would come into effect by 2023 or 2024. However, many challenges are pointing to this policy. For this government venture to be successful, the authorities’ foremost step is to set up an infrastructure of testing centres and scrap yards across the country. As of now, India only has seven automated fitness test centres and two authorised scrap yards which is inadequate to serve the purpose. There is a need for a tremendous amount of money to establish more testing centres and scrapyards, but our economy is depressed due to the Covid 19 pandemic.

In addition to this, de-registering a vehicle in our country is a cumbersome process; it will discourage owners of old vehicles from discarding or scrapping their old vehicles. Also, there are many vehicles that may be above 15 years old but have not covered many kilometres. So, it will be unprofitable to discard such vehicles that have not covered adequate kilometres.

8.  CONCLUSION

If executed properly, this venture of Government will be a milestone in India’s journey to reduce pollution and road accidents just like other countries like the USA, China, Germany, United Kingdom, Japan, France, South Korea, etc. We come across much news of increased pollution and road accidents every day. If we all participate in it, we can reduce pollution that is increasing day-by-day, making our lives miserable in the coming years by exposing us to many chronic diseases. The road accidents which take the valuable lives of millions can also be reduced. In addition to this, the economy of our country which was negatively affected due to the pandemic can be reinstated, which enhances the development of our country.

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[1] Karan Manral, Significant milestone towards Aatmanirbhar Bharat’: PM Modi launches National automobile scrappage policy, THE HINDUSTAN TIMES, https://www.hindustantimes.com/india-news/investor-summit-gujarat-pm-modi-launches-national-automobile-scrappage-policy-101628833397893.html. (Last modified AUG 13, 2021, 11:31 AM).

[2] Road Transport Year Book 2012, Ministry of Road Transport & Highways, https://morth.nic.in/road-transport-year-book. ( visited on 21 November 2021 09: 30 AM)

[3] S Kalyana Ramanathan, India to top in car volumes by 2050, REDIFF, https://www.rediff.com/money/2004/oct/23car.html, (last modified October 23, 2004, 10:23 PM).

[4] Express News Service, Want govt to build 1,600 km green wall along Aravalli, says activist, THE INDIAN EXPRESS,https://indianexpress.com/article/cities/ahmedabad/want-govt-to-build-1600-km-green-wall-along-aravalli-says-activist-vijaypal-baghel-6182069/.  ( last modified December 24, 2019, 6:09:40 am).

[5] Press Trust of India, Nitin Gadkari claims scrappage policy will increase auto industry’s turnover by Rs 10 lakh crore, FIRSTPOST, https://www.firstpost.com/india/nitin-gadkari-claims-scrappage-policy-will-increase-auto-industrys-turnover-by-rs-10-lakh-crore-9434221.html.  (Last Modified March 18, 2021, 16:06:31 PM).

[6] Sparsh Upadhyay, National Automobile Scrappage Policy Launched By PM Narendra Modi: Key Takeaways, LIVE LAW, https://www.livelaw.in/news-updates/national-automobile-scrappage-policy-launched-pm-narendra-modi-key-takeaways-179504. ( Last modified13 Aug 2021, 4:44 PM)

[7] Vehicle scrappage policy launched: Key things to know, TIMES OF INDIA, https://timesofindia.indiatimes.com/business/india-business/pm-modi-launches-vehicle-scrappage-policy-key-things-to-know/articleshow/85295708.cms. ( Last modified Aug 13, 2021, 12:47 PM).

Author: Aashlin Maria Alex, Christ (Deemed to be University), Bangalore

Editor: Kanishka VaishSenior Editor, LexLife India

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