Vehicle Scrappage Policy in India: Insight, Explanation and Benefits

Team AckoApr 30, 2024

The Vehicle Scrappage Policy, 2021 focuses on phasing out old and unfit vehicles. It aims to de-register private cars over 20 years old and commercial vehicles over 15 years old. 

Does that mean you have to scrap your vehicle? 

Are there any rules and regulations about the vehicle scrappage scheme? 

Well, read below to get an insight into the policy of scrapping old vehicles in India.

Contents

• What is Vehicle Scrappage Policy in India?
• Highlights of the Vehicle Scrappage Policy Announcement
• What is the aim of Vehicle Scrappage Policy 2021?
• Benefits of the Vehicle Scrappage Policy
  • 1) Government Vehicles
  • 2) Commercial Vehicles
  • 3) Private Vehicles
  • 4) Vintage Vehicles
• Fitness Tests for Vehicles
• Where should I get the vehicle tested or scrapped?
• What are the incentives for scrapping old vehicles?
• What are the disincentives of owning an old vehicle?
• Fee for renewing vehicle registration
• Under what conditions is my car liable to be scrapped?
• How does the policy impact you as a two-wheeler owner?
• How to scrap a car in India?
• Owning Old Vehicles Will Be Costly
• RTO rules for car scrapping process in India
• RTO rules for deregistration and scrapping of old vehicles
  • How does scrapping your car affect insurance?
• Frequently Asked Questions
• Updates on vehicle scrappage policy

What is Vehicle Scrappage Policy in India?

The Vehicle Scrappage Policy is a government-funded programme to scrap old and unfit vehicles and replace them with modern and new vehicles on Indian roads. The primary goal of the policy is to create an ecosystem for phasing out unfit and polluting vehicles to achieve a lower carbon footprint in the country.

Beginning April 1, 2023, fitness testing of Heavy Commercial Vehicles (HCVs) shall be conducted only through Automated Testing Stations (ATSs). For other types of Commercial Vehicles (CVs) and Private Vehicles (PVs), the fitness testing shall also be conducted through the ATS and begin on June 1, 2024.

Commercial vehicles and private vehicles older than 15 and 20 years, respectively, shall be scrapped if they fail the fitness test. If a vehicle fails the fitness test, it shall be defined as an ELV (End-of-Life Vehicle).

Highlights of the Vehicle Scrappage Policy Announcement

The Indian automobile sector has been in a troubled zone since the latter half of 2019. The following COVID-19 pandemic made the situation even worse. Although post-Diwali sales in 2020 have uplifted the sector to an extent, the situation is still worrisome. The scrappage policy is said to help the struggling automobile sector in India. With old vehicles being phased out, there will be a demand for new vehicles. Scrapping unfit vehicles will also benefit the environment.

Here’s a list of key highlights related to the Vehicle Scrappage Policy announcement.

• The policy is directed towards building a system to scrap unfit vehicles in India.

• Rules and regulations will be made around the actual scrapping process, which shall be laid out in the announcement made by the MoRTH.

• Vehicle owners will be given certain benefits for scrapping old vehicles.

• The scrapping of unfit vehicles will help reduce air pollution to a considerable extent (subjective as per location).

• People will look forward to buying environment-friendly, safe, and technologically advanced vehicles.

What is the aim of Vehicle Scrappage Policy 2021?

The main objective of the Vehicle Scrappage Policy 2021 is to identify old, unfit and polluting vehicles and scrap them. Here are some of the key takeaways of the vehicle scrappage scheme.

• Reduce pollution by scrapping vehicles without valid fitness and registration.

• Improve passenger, road and vehicular safety.

• Generate employment in the automobile industry.

• Formalise the current informal vehicle scrappage industry.

• Improve fuel efficiency and reduce maintenance costs for vehicle owners.

• Increase availability of low-cost raw materials for automotive, steel and electronics industry.

Benefits of the Vehicle Scrappage Policy

Here’s a list of potential benefits of the new vehicle scrap policy for the economy, automobile sector, vehicle owners, and others.

• Scrapping unfit vehicles will result in less air pollution and better air quality.

• With old vehicles being scrapped, the demand for new vehicles will rise as the old ones will need to be replaced by new ones. More than 51 lakh light motor vehicles (private and commercial) are more than 20 years old. 

• Overall, the automobile sector will benefit from the new scrappage policy leading to more job opportunities. For example, new vehicle scrapping centres will need manpower.

• New advanced vehicles will be comparatively safer. For example, new cars come with superior safety features.

• The recycling industry will also be more active leading to higher revenue.

• Vehicle owners might receive tax benefits as an incentive to scrap an old vehicle.

• Vehicle owners might also get the best price for car scrappage for workable parts such as tyres.

Also, read: Is car insurance tax deductible? The Categorisation of Vehicles for the Scrappage Policy

Different types of vehicles are driven on Indian roads. Due to this diversification, the same rules cannot apply to all cars. Thus, the need for categorisation of vehicles concerning scrappage. Here are the details.

1) Government Vehicles

The Scrappage Policy for government vehicles was approved in January 2021. As per this approval, vehicles belonging to the Centre as well as State Government, that are more than 15 years old, shall be scrapped. Such a policy will come into effect next year. The date set for the application of this policy is 1 April 2022.

2) Commercial Vehicles

Vehicles that are used for commercial purposes; for example, transport vehicles, are termed as commercial vehicles. After completion of 15 years, the commercial vehicle will need to undergo a fitness test. If considered unfit, the vehicle shall be scrapped as per the commercial vehicle scrap policy rules.

3) Private Vehicles

Vehicles used by citizens to commute from one place to another are termed as private vehicles. The age limit to undergo a fitness test for a private vehicle is set at 15 years.

4) Vintage Vehicles

Vintage cars and bikes are generally older than the average vehicle on the road. However, they are driven less frequently and maintained well. Thus, this is a separate category and the nature of such vehicles shall be considered regarding directives around scrapping them.

Fitness Tests for Vehicles

Here are the key aspects of a fitness test for old vehicles under the Vehicle Scrappage Policy 2021.

• Fitness testing involves detailed inspection that determines the roadworthiness of the vehicle.

• The test also determines if the vehicle is contributing to environmental pollution.

• Similar to checking your vehicle’s emission levels through the Pollution Under Control test, you also need to check the vehicle’s fitness through authorised Automated Testing Stations.

• The validity of the fitness test shall be for five years, after which the vehicle needs to undergo fitness tests.

• Vehicles failing the fitness test means you cannot renew the vehicle’s registration.

• A green cess of 10 to 15% of road tax may be levied for older vehicles that have passed the fitness test. It could vary from one location to another.

• Vehicle owners whose vehicles are deemed unfit have the option to scrap them. However, they also have the opportunity to repair it to pass the fitness test.

Where should I get the vehicle tested or scrapped?

If your vehicle’s registration is due for renewal, here are a few important points that you must consider.

• Visit the authorised Automated Testing Station (ATS) if you wish to retain the vehicle.

• Visit the nearest authorised scrapping facility, if you want to scrap the vehicle.

• If you're going to dispose of your vehicle, you have to wait until the ATSs are operational. They are expected to be accessible through the VAHAN database.

What are the incentives for scrapping old vehicles?

Here are the incentives when you scrap old vehicles.

• Avail a discount: After scrapping the vehicle, the owner may receive a 4 to 6% discount on the new vehicle’s cost (ex-showroom).

• No registration charges: Upon declaring the Certificate of Deposit, the registration fees for the new vehicle are waived.

• Concession on road tax: State governments may offer a concession on the road tax on the new vehicle. The concession can be up to 25% for non-transport vehicles and 15% for transport vehicles.

• Discount on a new vehicle: Vehicle manufacturers have been requested to offer a discount of 5% on purchasing a new vehicle against the Certificate of Deposit. This discount is over and above the scrap value, you receive for your vehicle.

What are the disincentives of owning an old vehicle?

Here are the disadvantages of owning an old vehicle.

• Higher fees: The charges for the fitness test and the grant of Fitness Certificate (FC) for commercial vehicles that are more than 15 years old are higher.

• Higher re-registration fees: For private vehicles that are more than 15 years old, the charges for the renewal of the RC are higher.

• Green Cess: A green cess of 10 to 15% over and above the road tax shall be applicable for such older vehicles.

Fee for renewing vehicle registration

Here is the fee structure for the renewal of vehicle registration charges for private vehicles that are over 15 years old.

Here is the fee structure for the renewal of vehicle registration charges for commercial vehicles over 15 years old.

Fitness test (vehicles over 15 years old)

Issuance or renewal of RC (vehicles over 15 years old)

Under what conditions is my car liable to be scrapped?

Old, unfit, and polluting vehicles add to the carbon footprint in the country. To formalise the vehicle scrapping facility in India, there are a few rules and regulations to facilitate the renewal of registration or scrapping of older vehicles as per the new Vehicle Scrappage Policy 2021. Here are the conditions for the eligibility of scrapping an old vehicle.

• Commercial and private vehicles over 15 years old shall be tested for fitness to renew the registration.

• If the vehicle is found unfit, the owner has the option to repair it and apply for the re-test.

• If the vehicle fails the fitness test, it shall be declared an End-of-Life Vehicle (ELV) and eligible for scrapping.

How does the policy impact you as a two-wheeler owner?

Here is the impact of the bike scrap policy on a two-wheeler owner.

• Mandatory fitness test: A fitness test is compulsory for two-wheelers above 15 years old. The bike shall be scrutinised for fitness. If the vehicle is unfit, owners can get the bike repaired and apply for a re-test. If the two-wheeler is deemed unfit, it shall be categorised as an ELV and eligible for scrapping.

• Automated fitness test: Currently, fitness tests are performed manually. However, with the introduction of the Vehicle Scrappage Policy, the vehicle shall be subject to a computerised fitness test without human intervention for accurate results.

• Compulsory End-of-Life Vehicle (ELV) certificate: If your two-wheeler fails the computerised fitness test, the vehicle shall be deemed unfit and an ELV certificate is issued by the ATS. Since the vehicle is not road worthy, you can’t insure your bike with the mandatory Third-party Bike Insurance.

How to scrap a car in India?

Here is the vehicle scrapping process in India*.

Step 1: Contact the scrapping centre

• Call the authorised recycler or reach out to them via their websites.

• Once you get the appointment, you can drive the car to the scrapyard or request them to collect the car from your place. Please note that there could be towing charges if you want them to collect your vehicle.

Step 2: Complete the documentation

• Copy of the Permanent Account Number of the vehicle owner. 

• Original Registration Certificate of the vehicle.

• End-of-Life Vehicle certificate issued by the Automated Testing Station.

• Cancelled cheque.

• Letter of authorisation on a stamp paper for the authorised person if the vehicle owner is unable to submit the vehicle at the Automated Testing Station.

• Identity proof of the authorised person (passport, driving licence, Aadhaar, voter card, or photo identity card issued by the State Government or the Central Government.

• Address proof of the vehicle owner (electricity bill, water bill, landline telephone bill, piped gas bill, etc.

• Digital photograph of the vehicle owner or authorised person with the ELV.

• An undertaking from the vehicle owner acknowledging that all information furnished is true and correct to their knowledge.

Step 3: Let the scrappage start

• Typically, the recycler removes tyres, battery and the CNG kit (if any). The refrigerant from the air-conditioning unit is drained and sent to the de-pollution station. All liquids such as engine oil, gearbox oil, fuel, brake fluid, steering oil, windshield washer fluid and engine coolant are also drained. The recycler removes the exhaust system and the fuel tank from the vehicle.

• Once all the fluids are removed from the car, the body panels, boot lid, bonnet, fenders, doors, headlights and bumpers are manually removed. After which, the steering wheel, seats, floor mats, dashboard, roof lining, and other interior components are manually removed. The wiring system is also removed from the vehicle. 

• At the next step, the running gear is removed from the vehicle and the car is hoisted, and the engine, brakes and suspension are removed from the car. Finally, the VIN (Vehicle Identification Number) plate is cut out. 

Step 4: The remaining part of the vehicle is recycled or reused

• With all the car parts removed, only the body shell remains.

• The car’s body shell is hoisted by a crane and dropped into a crushing unit. What comes out of the crusher is a steel bale that will be sold for smelting.

• The other parts which were removed will either be sold or scrapped into a steel bale.

• The recycler ensures AC gasses or no oil are discharged into the air or onto the land to avoid contamination of the environment.

Step 5: Get the scrappage certificate

• Once the car is scrapped, the recycler will issue a ‘certificate of destruction’.

• You can use the certificate to get the vehicle de-registered at the respective Regional Transport Office (RTO). The scrap value will be paid to you through a cheque or digitally.

• Apart from using the certificate for the de-registration process, it can also be used to avail a discount from the car manufacturer on the purchase of your next vehicle, along with a discount on road tax and a complete waiver of the vehicle registration charges.

Disclaimer: The above content is for informational purposes only. It is recommended to take the help of an expert before making a decision. ACKO is not responsible for any action taken based on the information mentioned here.

Owning Old Vehicles Will Be Costly

The overall expenses related to renewing an old vehicle and the mandatory Fitness Test while re-registration is expected to dissuade vehicle owners from continuing with the vehicle. Comparatively, parting ways by scrapping the vehicle seems like a feasible option. Moreover, certain fees are expected to be hiked in the future. Such fee hikes can be periodic considering inflation.

Here are the costs to be incurred if your private vehicle is more than 15 years old.

• Fee for Fitness test

• Fee for renewing registration

• Green Cess

• Road tax

RTO rules for car scrapping process in India

Here are the RTO rules for scrapping cars in India.

• The vehicle owner has to write a letter to the concerned RTO about scrapping the car.

• The vehicle owner must submit an affidavit stating that the vehicle is not under a bank loan, insurance claims, or pending traffic challans or court cases. The affidavit should also say that the car was not involved in any thefts.

• The vehicle owner has to surrender the vehicle’s original documents, and the VIN plate is cut out after the car is scrapped. The RTO will hold the documents and the VIN plate for future reference.

• The scrap yard or facility’s confirmation on letterhead with the complete address is required, and the pictures of the scrapped vehicle are also required to be submitted to the RTO.

RTO rules for deregistration and scrapping of old vehicles

The vehicle owner must follow the RTO rules below to deregister old vehicles.

• Inform the respective RTO about scrapping the old vehicle.

• Surrender the vehicle Registration Certificate along with the chassis number plate removed at the time of scrapping the vehicle.

• Submit the confirmation document provided by the vehicle scrap dealer.

• Submit an affidavit with the application for deregistration of the vehicle.

• The affidavit must state that the vehicle is not under loan, insurance claims, or pending court cases.

• The RTO shall verify these documents and proceed to procure diligence reports from the traffic police and National Crime Records Bureau.

• The RTO shall verify the vehicle records maintained in their database regarding the sale of the vehicle.

• If the documents are found to be satisfactory, the RTO shall proceed with the deregistration of the old vehicle.

How does scrapping your car affect insurance?

Scrapping an old and unfit vehicle impacts the environment positively. Not just the environment, scrapping an old vehicle also impacts insurance. Since you may receive a discount on purchasing a new vehicle, the insurance cost also decreases.

The Vehicle Scrappage Policy in India is a beneficial step towards a cleaner and safer environment. Speaking of safety, it is also important to consider travel insurance while planning a trip. Many unforeseen events can disrupt travel plans, and having the best travel insurance can provide peace of mind and financial protection. So, it's always a good idea to consider travel insurance options before embarking on a journey.

Frequently Asked Questions

This section will answer common queries about the Government’s car scrappage scheme in India.

Is it mandatory to scrap an old vehicle?

Currently, it is not mandatory to scrap an old vehicle. However, if the vehicle is considered unfit, it would be better if you scrap it.

What is the aim of such a policy?

The primary aim of the policy is to ensure that unfit vehicles are scrapped leading to less pollution and more growth opportunities for the automobile sector.

What does a Fitness Test check?

The Fitness Test is conducted to check the roadworthiness of a vehicle along with its impact on the environment.

What will be the consequence of failing the Fitness Test?

The most important consequence of failing the Fitness Test would be the inability to renew the vehicle’s Registration Certificate.

Is there a fee for a Fitness Test?

Yes, you will have to pay a prescribed fee for a Fitness Test as per the new policy. It can be approximately Rs. 40,000 and can be subject to changes in the future. As per the Parivahan website, currently, the fee for conducting a Fitness Test for a vehicle is around Rs. 200 to Rs. 1000, depending upon the type of vehicle.

Which Indian ministry is related to the Vehicle Scrappage Policy?

The Ministry of Road, Transport and Highways (MoRTH) is associated with the Vehicle Scrappage Policy.

Will the Government-authorised scrapping centres give me the best car scrappage deals?

More details are awaited on this front. This should be made clear by the upcoming policy explanation by MoRTH.

Is the car scrappage scheme applicable for petrol and diesel vehicles?

Yes, the policy is applicable for both petrol and diesel vehicles.

How will the new policy lead to safer roads?

Scrapping old vehicles will prompt people to buy new and safer vehicles. Latest vehicles come with superior safety-based technology, such as advanced braking systems. This can lead to safer roads.

How will the scrappage centres be authorised by the Government?

Yes, the vehicle scrapping process will be performed at a Government-authorised vehicle scrapping centre.

How much will I get to scrap my car?

You might get an approximate 4% to 6% of the original ex-showroom price of the vehicle when you scrap your car.

Will all vehicles that are beyond the limit be scrapped?

Commercial vehicles older than 15 years and private vehicles older than 20 years must pass the fitness test. In case they fail the test, the vehicle shall be deemed unfit and approved to be scrapped.

Why was the Vehicle Scrappage Policy needed?

The policy's primary objective was to create an ecosystem for phasing out unfit and polluting vehicles from Indian roads. The policy also aims to formalise the vehicle scrappage industry.

What happens to the car at the scrapping facility?

The chassis number plate and all hazardous materials are removed. The parts can be salvaged before it is crushed and recycled.

Updates on vehicle scrappage policy

Registration renewal for vehicles older than 15 years will cost eight times more

- 6 October 2021

To discourage the use of old and unfit vehicles, The Ministry of Road Transport and Highways issued an official notification stating that the registration renewal of 15-year-old personal vehicles will cost approx. eight times more than the regular fee from April 2022. The ministry also informed that the fitness certificate renewal fee for commercial vehicles older than 15 years would also increase close to eight times as compared to the regular fee. 

Delaying the registration renewal of personal vehicles will add Rs. 300 every month to the overall fee as a penalty. For commercial vehicles, the penalty for delaying registration renewal is set to be Rs. 500 per month. Similarly, the delay charge for fitness certificate renewal is Rs. 50 per day for commercial vehicles.

As per the official notification, the following are the new registration renewal charges for a 15-year-old personal vehicle.

Below is a table highlighting the fitness certificate renewal fee for 15-year-old commercial vehicles.

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