Discount on New Vehicles Against Scrapping Certificates | 29 Aug 2024

Source: TH 

Why in News?

Auto manufacturers have agreed to offer discounts on commercial and passenger vehicles against a scrappage certificate of an old vehicle for a limited period of time.

• This scrappage discount will replace the discount customers were getting for exchanging their vehicles from car dealers.

What is the Voluntary Vehicle-Fleet Modernization Program (V-VMP)?

• About: The Voluntary Vehicle-Fleet Modernization Program (V-VMP) or Vehicle Scrapping Policy 2021 is a government sponsored programme to scrap old and unfit vehicles on Indian roads.
  • The policy stops re-registration for cars over 20 years old and commercial vehicles over 15 years old.
• Recent Developments:
  • Agreement on Discounts: Automakers have agreed to offer discounts of 1.5% to 3%, or up to Rs 25,000, to customers who purchase a new vehicle after scrapping the old vehicles.
  • Scrappage Terms: Commercial vehicle (CV) manufacturers are willing to offer discounts for a limited period of two years and passenger vehicle (PV) manufacturers are willing to offer discounts for one year against a Certificate of Deposit (Scrappage Certificate).
  • Discount by State Governments: State governments have taken a big interest in scrappage policy.
    • Many States which are offering 25-30% discount on road tax for recycled cars.
• Categorisation of Vehicles for the Scrappage Policy: The rules applied to scrap these vehicles shall vary depending on the categorisation of the vehicles.
  • Private vehicles: All private cars must undergo a fitness test after 15 years of their registration. If the car clears the fitness test, renewal of registration can be done which is valid for 5 years.
  • Commercial vehicles: Commercial vehicles, like buses, trucks, etc., are eligible for fitness tests every two years for the first 8 years of registration and every one year after 8 years till the registration age of the vehicle reaches 15 years.
  • Government vehicles: All State and Central government vehicles that are above 15 years of age will be scrapped.
  • Vintage vehicles: Old car scrap policy does not apply to vintage vehicles as they are mostly well-maintained and driven less frequently.
• Benefits of V-VMP:
  • Reduction in Pollution: It will reduce pollution by scrapping around 1 Crore vehicles without valid fitness and registration.
    • Scrapping of current End-of-life vehicles (ELVs) burden of the country will lead to 15-20% reduction in emissions due to vehicular pollution.
  • Formalisation of Scrappage Industry: The policy also aims at making the Indian scrappage industry organised, transparent and environment friendly.
  • Demand for New Vehicles: Scrapping old and unfit vehicles will create demand in the automobile industry, as the old ones will now be replaced with new vehicles.
  • Vehicular Safety: The nature of demand for vehicles will get augmented. There will be a demand for comparatively safer and technologically upgraded vehicles that come with better and superior features.
  • Circular Economy: It will provide a major push to the recycling industry.
    • This will not only make the recycling sector more active but create jobs in this industry as well.
    • In addition, it will also create further improvement in the R&D of waste and recycling management.
  • Road Safety: It will Improve road, passenger and vehicular safety.
  • Fuel Efficiency: It will improve fuel efficiency. In the BS VI era, petrol engines were upgraded to emit 25% less NOx (Nitrogen Oxides) as compared to diesel engines.

What Incentives and Disincentives are Provided Under V-VMP?

• Incentives under V-VMP: Various incentive mechanisms have been included in the policy to induce End-of-life vehicle owners to scrap older vehicles.
  • Discount on New Vehicles: The scrap value for an old vehicle provided by the scrapping centre is usually around 4-6% of the ex-showroom price of a new vehicle.
    • Government had issued an advisory to auto manufacturers to offer a discount of 5% on showing scrappage certificates while buying a new vehicle.
  • Concession in Motor Vehicle Tax: Rules are notified for state governments to offer concession on motor vehicle tax of up to 25% for non-transport vehicles and up to 15% for transport vehicles.
  • Waiving Registration Fees: Registration fees to be waived off for purchase of new vehicle.
• Disincentives under V-VMP:
  • High Fees for the Fitness Test: If a commercial vehicle is older than 15 years, then the fees for the fitness test and the issuance of a fitness certificate will attract higher charges.
  • High Registration Renewal Fees: If a private vehicle is older than 15 years, then the registration renewal charges will be higher.
  • Green Cess: In addition to the road tax, following the policy outlines of the vehicle scrap policy 2021, a green cess of 10-15% will be levied on old vehicles.

Conclusion

Vehicle Scrapping Policy 2021 is a significant step toward reducing vehicular pollution and promoting sustainability by incentivizing the scrapping of old and inefficient vehicles. The program encourages automakers and consumers to adopt newer, more efficient vehicles, thereby supporting the government's goals of a circular economy and environmental preservation. Ultimately, the V-VMP is expected to contribute to economic growth while aligning with global standards of emission control and resource management.