25% rebate on road-tax; waiver in registration fee for new cars: What the new vehicle scrapping policy means to you as a car owner?

Vehicle scrapping in India to be finally formalised with new scrapping incentives, fitness rules, and establishing scrapping centres.

25% rebate on road-tax; waiver in registration fee for new cars: What the new vehicle scrapping policy means to you as a car owner

Union Transport Minister Nitin Gadkari unveiled the vehicle scrapping policy in Parliament on 18 March 2021. Also termed as the voluntary vehicle fleet modernisation program, this will phase out unfit and polluting vehicles from Indian streets in the next few years.

As per the policy, the vehicle owner will get a scrap value on the old vehicle from the scrapping centre. This value is generally 4%-6% of the ex-showroom price of the vehicle. The registration fee on the purchase of a new vehicle may be waived against the scrapping certificate. Such vehicle owners will also receive a 25% rebate on the road tax of personal vehicles (15% in the case of commercial vehicles). Owners can show the scrapping certificate to avail of a 5% discount on the price of the new vehicle as well.

Scrapping will be done based on the fitness of the vehicle. Commercial vehicles will be tested through automated fitness centres while non-renewal of private vehicle registration will be considered to be indicative of lack of fitness. These criteria will be adapted based on international best practices. Criteria are likely to include emission tests, braking, safety equipment etc.

Commercial vehicles older than 15 years will be deregistered on the failure of the fitness test. Private vehicles will be deregistered after 20 years on the failure of fitness test or lack of registration renewal. As a disincentive measure, fitness certification and re-registration will be more expensive for such vehicles.

The rules for fitness and scrapping centres are expected to be unveiled by October this year, while scrapping of government and PSU vehicles aged above 15 years will start from 1 April 2022. Mandatory fitness testing of heavy commercial vehicles is planned to start from 1 April 2023, and for other vehicles by 1 June 2024.

Related: 5 Things you need to know about transferring car ownership

What is the current process of scrapping in India?

The car owner has to approach the respective RTO and inform of the scrapping, along with de-registration. The chassis number is removed and authorised scrap dealers are required to scrap and dispose of the vehicle in an environmentally safe manner. The scrap price is fixed and the owner may keep photo evidence for producing before the RTO. The vehicle owner informs the RTO about the scrapping, and provides the original RC, chassis number, and scrap dealer’s confirmation. The car shouldn’t be under any loan, insurance claim, or theft/court case. The RTO verifies the same and obtains confirmation from the traffic police and National Crime Records Bureau.

Related: 6 Things to keep in mind before buying used cars

What are the benefits of the new vehicle scrapping policy?

While unveiling this policy in Parliament, the Union Transport Minister stated that the policy will aim to reduce the number of old and defective vehicles on the road, and consequently reduce air pollution. The policy will reinforce India’s commitment to the environment, and improve road safety and fuel efficiency. The vehicle scrapping process and industry will be formalised, as will be the availability of a low-cost scrapping process. 

How is scrapping delayed or avoided in India presently?

At present car owners try to sell their cars to a neighbouring state if the RC is about to expire. Once it is transferred to a new RTO, the car will be re-registered and the records will be updated in the old RTO. While applying for registration in the new RTO, the owner must produce a no objection certificate (NOC) from the old RTO along with necessary forms and documents. Another ploy is to  apply for re-registration in the old RTO for five years. Delhi NCR-registered vehicles cannot avail of this re-registration option. Here's a checklist for Buying/Selling a second hand car.

Related Article

Premium Articles