The launch of India’s vehicle scrapping policy, or the “Voluntary Vehicle-Fleet Modernisation Programme”, seeks to usher in a new age of what it means to own and use an automobile in India. It was unveiled in Parliament in March by Road Transport & Highways Minister Nitin Gadkari.
On Friday, while launching the policy in an investor summit in Gujarat, Prime Minister Narendra Modi said it would help phase out unfit and polluting vehicles in an environment-friendly manner. “Our aim is to create a viable circular economy and bring value for all stakeholders while being environmentally responsible,” he said.
The policy dictates that all automobiles over a certain age should be off the roads in the interest of better pollution control and safety, which new vehicles ensure. Commercial vehicles over 15 years old and personal vehicles over 20 years old are marked for scrapping — it doesn’t matter if they run on diesel or petrol — if they fail an automated fitness test. These will be deregistered; the owner can choose to scrap them, but cannot use them on the road.
A circular economy depends on reuse, sharing, repair, refurbishment, remanufacturing and recycling of resources to create a closed-loop system, minimising the use of resources, generation of waste, pollution and carbon emissions.
When a car is scrapped, apart from metals including iron and steel, many other parts may emerge that can be refurbished and ploughed back into use. Recycled steel from scrap, even seats and plastic parts, have value in the scrap economy. It is similar to the economic activity of scrappage of old ships, like in Alang shipbreaking yard in Gujarat.
In a circular economy, products, materials, equipment and infrastructure are kept in use for longer, thus improving productivity.
India has 51 lakh light motor vehicles that are more than 20 years old and 34 lakh over 15 years old. Around 17 lakh medium and heavy commercial vehicles are older than 15 years without valid fitness certificates, according to data with the Ministry of Road Transport and Highways.
This does not mean that vehicle owners need to rush to scrap their old vehicles. India is still not ready with the infrastructure to either test or scrap vehicles in such large numbers. The investor summit seeks to sensitise India’s industry about the scope and profitability of the scrappage industry. Gadkari had told Parliament in March that the resultant ecosystem can attract investment worth Rs 10,000 crore and create 35,000 new jobs.
The government has come out with rules and specifications on what kind of Automated Fitness Centres should come up and who can set them up. It has also come up with how the scrapping yards should be.
It will give India Inc time to come up with an ecosystem wherein testing and subsequent scrapping can happen organically without the consumer facing duress.
That is why mandatory testing of heavy commercial vehicles will start in April 2023, and that of other categories of vehicles — personal vehicles, for instance — will start, in a phased manner, in June 2024. There are talks within the government to alter the rollout plan by a few months.
To help vehicle owners find a reason to retire old vehicles, the government envisages that the scrappage certificate will entitle the owner with something extra, such as a tax rebate, sops, and a discount on the new car. The certificate is tradable, which means it can be used by anyone and not necessarily by the owner of the scrapped vehicle.
Globally, a scrappage policy has been followed by boost in demand in the auto manufacturing sector, especially in Europe and the US. This has also been a tool to deal with economic slowdown in the manufacturing sector and consumption due to recession. Besides, there are spelt-out benefits vis-à-vis environment since newer cars come with better emission standards and better fuel efficiency.
In that case, the owner can continue to use it, but the charges for reregistration will be much steeper. In a draft notification issued in March, reregistration charges of all vehicles have been proposed to be hiked from eight to around 20 times, depending on the type of vehicle. These charges will kick in from October this year. Personal vehicles, for instance, are up for reregistration after they have completed 15 years.
Automated Fitness Centres will have tracks and equipment suitable to test for various criteria such as emission norms, braking and other parameters, without human intervention. The Ministry has requested states to consider providing land for free for these centres.
Market demand will drive the number and concentration of fitness centres in an urban area. For example, Delhi with its huge vehicle fleet may have more fitness centres than a city with much fewer cars.
But the government wants at least 718, or one in each district. The Centre is promoting model Inspection and Certification Centres worth Rs 17 crore in all states. It has sanctioned 26 such model centres. The Centre does not want these facilities too far from city centres, so that vehicle owners do not have to travel great distances.
As for scrapping centres, the Ministry has elaborated how these will be operated. These are not exactly new in India. Notably, MMRPL, a joint venture between Mahindra and state-owned MSTC Limited, is one of the first such centres in India, operating out of Greater Noida.