Finance Minister Nirmala Sitharaman has announced a vehicle scrapping policy in her Union Budget speech today, in a bid to curb pollution.
Announcing the long-pending move, the Finance Minister stated that the voluntary vehicle scrapping policy is being announced to phase out old and unfit vehicles.
Private vehicles will undergo fitness tests in 20 years after they first hit the road, while commercial vehicles will be tested in 15 years’ time. If found unfit, they would effectively need to be scrapped.
The government has announced it will offer financial or tax-based benefits to consumers who choose to get rid of their old vehicles and purchase a new one.
It is expected that this would take out heavily polluting vehicles off of Indian roads, while boosting demand in the automobile industry that is struggling of late, since, till December in FY21, automobile sales fell by 24 percent, while the degrowth was 18 percent last fiscal.
The policy, which was among the top demands of the automobile industry, aims to bring Rs 43,000 crores worth business opportunities by boosting consumption.
However, the real world effectiveness of the vehicle scrapping policy is to be seen, for, estimates suggest that the average age of cars and 2-wheelers in India is 8 years, far below the time limit the policy allows.
Earlier, the Ministry of Road Transport and Highways proposed to get rid of all vehicles registered with government departments that are older than 15 years from 1st April, 2022.
For private vehicles, the ministry proposed to levy a “green tax” which would be 10-25 percent of the road tax and levied at the time of renewal of registration certificate after 15 years.
Transport vehicles older than 8 years would have to pay the same “green tax” during renewal of registration certificate, had the proposal been implemented.
