Vehicle Scrappage Policy in India: Aim, Benefits, and Incentives

The trusted car that has been with you for decades must hold memories, but it might be hurting the air we breathe. The Government of India has introduced a new initiative to tackle this issue. It is not just about taking old cars off the road; it is about making our cities cleaner and roads safer.

If you own an older vehicle, you might be worried about what comes next. Do not worry. This guide explains everything about the vehicle scrappage policy, how they affect you, and the benefits you can claim. Let us understand how we can move towards a greener future together.

Understanding the Vehicle Scrappage Policy

The Vehicle Scrappage Policy is a strategic initiative launched by the Government of India. The core intention is to identify and remove unfit and polluting vehicles from Indian roads. This is a voluntary-cum-mandatory program designed to modernise the vehicular fleet in the country.

When vehicles age, they tend to emit more greenhouse gases compared to newer models. They also become less safe due to wear and tear. This policy creates an ecosystem where vehicle owners are encouraged to scrap their old vehicles and replace them with newer and environmentally friendly options.

The government aims to reduce the country’s carbon footprint significantly. By phasing out these older machines, the policy hopes to reduce fuel imports and boost the availability of low-cost raw materials like steel and plastic for the manufacturing industry.

Also Read: Credit Score and Car Insurance: The Hidden Truth for Indian Car Owners

Why was the Vehicle Scrappage Policy Introduced?

The Indian automobile sector faced a slowdown in late 2019, which was further impacted by the global pandemic. To revive the industry and simultaneously address environmental concerns, the scrappage policy in India was formulated.

Here are the primary aims of this initiative:

1. Pollution Control: To reduce air pollution by removing vehicles that have high emission levels.

2. Road Safety: To ensure that only vehicles that are mechanically fit and safe are running on the roads.

3. Economic Boost: To stimulate demand for new vehicles, this creates jobs and revenue in the automobile sector.

4. Formalisation: To organise the currently informal vehicle scrapping market into a regulated and safe industry.

Categorisation of Vehicles Under the Policy

Not all vehicles are treated the same way. The rules differ based on who owns the vehicle and what it is used for. It is important to know which category your vehicle falls into to understand the specific timeline applicable to you.

Government Vehicles

This was the first category to be targeted. All vehicles belonging to the Central Government, State Governments, Municipal Corporations, Panchayats, State Transport Undertakings, and Public Sector Undertakings (PSUs) that are older than 15 years must be scrapped. These vehicles do not have the option of a fitness test renewal; they must be deregistered and scrapped.

Commercial Vehicles

These are vehicles used for transport and business purposes, such as trucks, buses, and taxis. The policy dictates that commercial vehicles must undergo a fitness test after they complete 15 years. If they fail this test, they are liable to be scrapped.

Private Vehicles

This category includes cars and two-wheelers used by citizens for personal commuting. The age limit set for private vehicles is 20 years. After this period, the vehicle must pass a fitness test to renew its registration. If it is unfit, it falls under the old vehicle scrap policy guidelines.

Vintage Vehicles

The government recognises the heritage value of vintage cars and bikes. These vehicles are generally maintained well and driven less frequently. Therefore, they are treated as a separate category and are generally exempted from the strict scrapping mandates, provided they follow specific regulations regarding their usage and registration.

Also Read: NOS in Cars: Meaning, Benefits, Risks, and Legal Aspects

The Vital Role of Fitness Tests

The core mechanism of the vehicle scrappage policy in India is the "Fitness Test." It is no longer about just the age of the vehicle; it is about its health.

Beginning from specified dates, fitness testing for Heavy Commercial Vehicles and other categories is being shifted to Automated Testing Stations (ATS). These are modern facilities where machines, rather than humans, check the vehicle to ensure accuracy and eliminate corruption.

What Happens During a Fitness Test?

1. Emission Check: Does the vehicle meet the current pollution standards?

2. Safety Inspection: Are the brakes, engine, steering, and structural integrity intact?

3. Performance: Is the vehicle fuel-efficient enough for modern roads?

If your vehicle passes this test, you can renew its registration for another 5 years. However, if it fails, you are allowed to repair the vehicle and reapply.

If it fails repeatedly, it is declared an End-of-Life Vehicle (ELV) and must be scrapped.

Benefits of the Scrappage Policy

While it might seem difficult to part with an old vehicle, the policy offers significant benefits to the economy, the environment, and you as a vehicle owner.

For the Environment

This is the most direct impact. Newer vehicles adhere to stricter emission norms (like BS-VI). By replacing an old BS-I or BS-II vehicle with a modern one, we drastically cut down on particulate matter and nitrogen oxide emissions. This leads to cleaner air in our congested cities.

For the Economy and Industry

The Indian car scrap policy is expected to attract new investments. Setting up testing stations and scrap centres creates employment. Furthermore, recycling materials like steel, copper, and plastic reduces the need to import these raw materials, making new vehicles slightly cheaper to manufacture in the long run.

For the Vehicle Owner

1. Safety: You drive a car that has modern safety features like airbags and ABS, which old cars often lack.

2. Low Maintenance: Old cars break down often and guzzle fuel. New cars are fuel-efficient and require less maintenance.

3. Incentives: The government has structured several financial benefits to encourage you to opt for scrapping.

Also Read: How to Get a Fancy Registration Number for a Car and a Bike

Incentives for Scrapping Old Vehicles

To make the transition easier, the government has proposed several financial incentives for owners who choose to scrap their old vehicles voluntarily. These incentives make buying a new car much more affordable.

Scrap Value

When you hand over your vehicle to a registered scrapping center, you will receive a scrap value. This is estimated to be around 4% to 6% of the ex-showroom price of a new vehicle.

Registration Fee Waiver

If you produce the "Certificate of Deposit" (proof that you scrapped your old car), the registration fee for your new vehicle will be completely waived. This is a significant saving.

Road Tax Concession

State governments have been advised to offer concessions on road tax for vehicles purchased after scrapping an old one. This can be up to:

1. 25% for non-transport (personal) vehicles.

2. 15% for transport (commercial) vehicles.

Manufacturer Discounts

The government has requested automobile manufacturers to offer a discount of 5% on the purchase of a new vehicle if the buyer presents a scrapping certificate.

Disincentives: The Cost of Keeping an Old Vehicle

If you choose not to scrap your old vehicle and want to keep driving it, it will become an expensive affair. The government has increased the fees for re-registration and fitness testing to discourage the use of old vehicles.

Green Cess

In addition to the standard road tax, you may have to pay a "Green Cess." This is a tax levied on older vehicles because they pollute more. The rate varies between 10% to 25% of the road tax, depending on the city and the pollution levels there.

Also Read: What is Ethanol Blending & How Does it Impact Your Insurance Premium?

Hiked Fees for Registration and Testing

The cost to renew your registration and get a fitness certificate has increased drastically.

Fee Structure Comparison (Private Vehicles > 15 Years)

Fee Structure Comparison (Commercial Vehicles > 15 Years)

As you can see, the cost of holding onto an old commercial vehicle has skyrocketed, making scrapping a more financially logical decision.

Impact on Two-Wheeler Owners

The Vehicle Scrappage Policy applies to motorcycles and scooters as well. India has a massive population of two-wheelers, and many of them are older than 15 years.

1. Mandatory Testing: Just like cars, bikes older than 15 years must undergo a fitness test.

2. The Process: The bike is checked for engine performance, brakes, and emissions.

3. The Outcome: If it fails, it becomes an End-of-Life Vehicle. If it passes, you must pay the "Green Cess" and the re-registration fees to keep using it.

For many bike owners, maintaining an old bike is a matter of pride. However, an old bike requires more than just mechanical maintenance; it requires financial security, too.

If your car passes the fitness test, it means it is roadworthy. But being roadworthy does not mean being immune to accidents. Older cars can be more susceptible to damage during mishaps. This is where you must ensure your paperwork is solid. While you handle the mechanical upgrades, let Bajaj General Insurance’s car insurance handle the financial risks.

Also Read: Regional Transport Office in Karnataka

Step-by-Step Guide: How to Scrap Your Car

If you have decided that scrapping is the best route, here is a simple guide on how to go about it in India.

Step 1: Locate a Facility

You need to find an Authorised Vehicle Scrapping Facility (AVSF). You can search for these online or contact your RTO for a list of registered scrappers. Do not give your car to a local unorganised scrap dealer if you want the legal benefits.

Step 2: Document Submission

Once you contact the centre, you will need to submit specific documents to prove ownership. These typically include:

1. Original Registration Certificate (RC).

2. PAN Card of the owner.

3. Aadhaar Card or valid ID proof.

4. Cancelled Cheque (for bank transfer of scrap value).

5. Authorisation letter (if the owner is not present).

Step 3: Verification and Evaluation

The scrapping centre will verify the documents against the VAHAN database to ensure the car is not stolen or blacklisted. They will then evaluate the weight and condition of the car to offer you a final scrap price.

Step 4: Dismantling

This is an environmentally controlled process.

1. Depollution: Tires, batteries, and CNG kits are removed. Fluids like engine oil, brake fluid, and coolants are drained safely.

2. Stripping: Useful parts are removed for resale or recycling. Interiors, seats, and wiring are taken out.

3. Crushing: The remaining metal shell is crushed into a bale of steel, which is sent to steel mills for recycling.

Step 5: Certificate of Deposit

Once the vehicle is scrapped, the facility will issue a "Certificate of Deposit." This is the most important document. You will use this certificate to claim your discounts and tax waivers when you buy your new car.

Step 6: Deregistration

The scrapping facility usually helps update the VAHAN database that the vehicle is scrapped. This effectively deregisters the vehicle from the RTO records, ensuring it cannot be used for illegal activities in your name.

RTO Rules for Deregistration

The Regional Transport Office (RTO) plays a strict role in this. To deregister an old vehicle, the owner must provide an affidavit stating that:

1. The vehicle is not under any loan (No Objection Certificate from the bank is needed).

2. There are no pending insurance claims.

3. There are no pending court cases or traffic challans.

The RTO verifies these details with the National Crime Records Bureau and traffic police. Only after clear verification is the deregistration finalised.

Also Read: What is RTO and DTO, and Difference Between Them?

How Scrapping Affects Your Insurance?

When you scrap a car, your existing insurance policy for that vehicle needs to be cancelled. However, if you have a "No Claim Bonus" (NCB) accumulated on your old policy, do not worry. You can transfer this NCB to your new car's insurance policy, provided you buy the new car within a specific timeframe (usually 3 years).

When you buy that new vehicle using your scrapping discounts, you will need to purchase a fresh insurance policy. In today's digital age, buying car insurance online is the fastest and most transparent way to secure your new asset. It allows you to compare premiums and coverage features instantly.

Final Words

The Vehicle Scrappage Policy is a welcome move towards a cleaner India. It encourages us to let go of vehicles that are burdening the environment and our wallets. While there are costs involved in keeping old cars, the incentives for scrapping them are designed to make upgrading to a new car financially attractive.

Once you have your new set of wheels, ensure it is protected from day one. Bajaj General Insurance offers comprehensive car insurance plans that are tailored to your needs.

Frequently Asked Questions

Is it mandatory to scrap my car after 15 years?

No, it is not mandatory to scrap your car just because it is 15 years old. However, it is mandatory to undergo a fitness test. If your car passes the test, you can renew the registration for another 5 years by paying the revised fees and green cess. You only have to scrap it if it fails the fitness test and cannot be repaired to meet the standards.

What happens if my vehicle fails the fitness test?

If your vehicle fails the test, you have the option to get it repaired and appear for a re-test. If the vehicle fails the re-test as well, it is declared an End-of-Life Vehicle (ELV). Once declared an ELV, it cannot be driven on roads and must be sent to an authorised scrapping facility.

Can I scrap my car anywhere?

To avail of the government incentives like registration fee waiver and road tax concession, you must scrap your vehicle at an Authorised Vehicle Scrapping Facility (AVSF). Scrapping it at a local, unauthorised scrap dealer will not give you the Certificate of Deposit required to claim benefits.

Does the policy apply to diesel and petrol cars differently?

The Vehicle Scrappage Policy rules regarding fitness testing apply generally based on the age of the vehicle (15 or 20 years) rather than the fuel type. However, certain regions like Delhi-NCR have specific NGT (National Green Tribunal) rules where diesel cars over 10 years and petrol cars over 15 years are automatically deregistered, regardless of fitness.

How do I get the discount on my new car?

To get the discount, you must present the "Certificate of Deposit" given to you by the scrapping centre to the car dealership when booking your new vehicle. This certificate serves as proof that you have scrapped an old vehicle.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.

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