Scrapping your old car may fetch more soon

The road transport ministry is discussing additional benefits to encourage scrapping, and the prime minister’s office (PMO) will greenlight the final policy, the people cited above said on condition of anonymity. The policy may be rolled out by the new government that takes office after the next general elections.

The scrappage policy floated in 2021 had proposed incentives to be given by manufacturers and state governments. The government had estimated that scrapping will attract investments of around ₹10,000 crore and create 35,000 jobs, something that failed to materialize as owners chose to continue to sell old vehicles in rural areas instead.

“The reason for the failure of this scheme is lack of incentives," said a government official, one of the two people cited above. "So, the plan is that both the government and automobile manufacturers offer incentives to the consumers—government incentives may come in the form of taxes, and auto manufacturers incentive could come in the form of discounts on the price of the vehicle," the official added.

Countries like the US, the UK, China, Canada and Germany offer a mix of incentives by the government and automakers to encourage scrapping. One of the most successful scrappage programmes in recent times was 'cash for clunkers' in the US, when financial incentives were offered to scrap old vehicles and purchase new ones, in an attempt to revive the ailing automobile industry.

Under the 2021 policy, the scrap value for the old vehicle would be 4-6% of the ex-showroom price of a new vehicle, and authorized scrapping centres would provide owners with a scrapping certificate. The road ministry had said it would promote setting up of automated fitness centres for commercial vehicles on a public-private partnership model.

Several automakers had entered vehicle scrappage in recent years through tie-ups or their group companies. These include Tata Motors Rewire, Mahindra Cero and Maruti Suzuki Toyotsu.

However, consumer response has been tepid, and utilization levels at most of these centres have remained below 20%, an industry executive said on condition of anonymity. Vehicle owners see no benefit in scrapping given the limited financial benefit, the executive added.

A second executive said the lack of routine vehicle fitness testing was a reason for low scrappage in India.

Some experts, however, feel getting polluting vehicles out of cities, where air quality frequently hits hazardous levels, is still a victory, regardless of where those vehicles end up.

“In addition to focusing on scrappage, the government may also focus on getting polluting cars off the roads in major cities. It has worked brilliantly in the Delhi-NCR region," Gaurav Vangaal, associate director at S&P Global Mobility.

Even when these vehicles don't get scrapped and are resold in rural areas, it helps in getting mobility to these regions at an affordable cost, while taking care of pollution in the city centres, he said.

“We must also not forget that a vehicle generates the bulk of its emissions during its manufacturing and this gets saved when it is resold," Vangaal said.

However, vehicles must be mandatorily scrapped after 20-25 years of operation at maximum, even in rural areas, he added.