Old Becomes Gold With PM's Vehicle Scrapping Policy: A Major Reform Towards Circular Economy

Prime Minister Narendra Modi launched the new Vehicle Scrappage Policy while virtually addressing Gujarat Investor Summit. Sharing further details, he said that the vehicles would not only be scrapped based on age but unfit vehicles would also be phased out after an automated testing process. The policy would come into effect immediately after the registration period of the vehicle is over. Vehicles would have to undergo mandatory fitness tests periodically.

According to the motor vehicles law in the country, commercial vehicles have a lifespan of 10 years, and passenger vehicles can safely be on the road for fifteen years. If a vehicle is still running on the road beyond the prescribed time limits, it is considered to pollute the environment more than the newer vehicles. Older technology in vehicles makes them more dangerous for the environment. Older vehicles also tend to use more fuel than newer vehicles, and this policy would help the people in smooth dumping of their vehicle and offer incentives.

Older vehicles pollute the environment ten times what new vehicles do. In India, there are more thavehin 51 lakh motor vehicles on the roads that are older than 20 years and more than 34 lakh light motor vehicles that are more than 15 years old. Nearly 17 lakh medium and heavy commercial vehicles are on the road without a valid fitness certificate. The main objective of this new policy is to phase out and recycle old vehicles systematically. While announcing the Union Budget, Finance Minister Nirmala Sitharaman said that the policy's benefits for scrapping old vehicles would be more than just environmental. It would significantly reduce the cost of manufacturing since usable materials like steel, copper, and plastic would be reused to make new vehicles. Since the cost of manufacturing would be low, the customer's purchasing power would increase, and the government planned on giving incentives to individuals buying a new car.

How Would The Test Function?

The automated fitness test would determine whether a vehicle, irrespective of its age, is capable of running on the road or not. The test would also examine the level of environmental pollution the vehicles are causing. If a vehicle fails the fitness test, it would be categorised under 'End Of Life Vehicle' (EOLV). After that, the car owner would be given an option to scrap the vehicle at Registered Vehicle Scrapping Facilities(RVSF). The government has not clarified whether the owner can get the issue rectified, but a vehicle can undergo a fitness test thrice. This is the government's initiative towards a circular economy.

What Is A Circular Economy?

A circular economy is a system in which resources are reused, shared, refurbished, remanufactured and recycled in a loop system. It aids in minimising pollution, reduces waste, pollution and carbon emissions. Metals like iron and steel are not the only parts that can be reused. Several other parts like seats and plastic parts of the car hold value in the scrap market. The principle is similar to that of dismantling a ship, in which usable resources are ploughed back into the economy and non-usable items are scrapped to develop something better. The system of circular economy considerably increased the life of raw materials.

PM Modi said, "The launch of Vehicle Scrappage Policy today is a significant step in India's development journey in the virtual conference. Vehicle scrapping will help phase out unfit and polluting vehicles in an environment-friendly manner." He further added that the aim was to create a viable circular economy and bring value for all stakeholders while being environmentally responsible.

Such policy announcement does not mean that all citizens rush to get their vehicles scrapped. India has a long way ahead to develop the necessary infrastructure to manage many such vehicles. The investor summit was a step forward to sensitive the industry and showed them the avenues of investing in the scrapping market. Union Minister Nitin Gadkari had mentioned in March this year that the scrappage industry could attract an investment of ₹10,000 crore and create more than 35,000 jobs.

To avoid undue pressure on the strapping system, fitness testing measures have been put in place. Medium and heavy vehicles would start ongoing tests from April 2023, and the testing for passenger vehicles would begin in a phased manner in June 2024. The next few months are crucial to see for the government would roll out a detailed plan for the same.

What Is In Store For The Consumer?

If a person decides to scrap their old vehicle and purchases a new vehicle, they will get a discount of 4 to 6 per cent on the ex-showroom price of the new vehicle. The automobile manufacturers would be directed to give a discount of 5 per cent if the buyers show a scrappage certificate. The owners who decide to scrap their old vehicles will get additional incentives for doing so. They would also get a road tax discount of up to 25 per cent in the case of passenger vehicles and 15 per cent in the case of commercial use vehicles. The private vehicles that are deemed unfit after the fitness test would be de-registered from the owner's name after failing the test thrice. The proposal of waiving the new vehicle registration fee for those who presented the scrappage certificate is still under speculation.

Countries of Europe and the USA have successfully boosted their manufacturing demand by incorporating the scrappage policy. This policy also helped the West to fight economic slowdown and reduced consumption during the recession. Needless to say, the policy provides a wide range of environmental solutions, reduced air pollution being one.

Even though the Ministry has given a detailed guideline about how the procedure would be undertaken, it must be noted that this is not new in India. The global scrap market worths more than $11 billion, and India is the potential hub for the scrap industry. We produce more than 100 million tonnes of steel every year. India imported 2.6 per cent of the global steel in 2016. The scrapping policy, if executed well, can make India self-sufficient in the production of steel.

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