AUTO ZONE: Getting a grip on vehicle scrapping policy

Sanjay Khurana

The Union Ministry of Road Transport and Highways (MoRTH) launched the Voluntary Vehicle Fleet Modernisation Programme (vehicle scrapping policy) in 2021. It is aimed at creating an ecosystem for phasing out old, unsafe, polluting vehicles and replacing them with newer, safer, and fuel-efficient vehicles.

The policy aims to reduce pollution, create job opportunities and boost demand for new vehicles. Several countries, including the US, Germany, Canada and China, have also introduced this policy to boost automotive industries and curtail vehicular pollution.

According to the policy, commercial vehicles that are more than 15 years old and passenger vehicles more than 20 years old will have to be scrapped if they do not pass the fitness and emission tests.

EXPANSION PLAN

We have plans to expand consistently across India and be present in 100 cities in the next 2-3 years via our network of modern recycling facilities and collection centres. —Sumit Issar, Managing director, Mahindra ACCELO Ltd

The key objectives are to reduce pollution by scrapping one crore vehicles without valid fitness and registration, improve road, passenger and vehicular safety as well as fuel efficiency and cut maintenance cost for vehicle owners, besides boosting the auto sector and generating employment.

The scrapping of current end-of-life vehicles (ELVs) in the country will lead to 15-20 per cent reduction in emissions due to vehicular pollution. The policy is also aimed at making the scrapping industry organised, transparent and environment-friendly.

In case of commercial vehicles (CVs), if a vehicle fails an automated fitness test, one re-test after the necessary repair/rectification, and re-inspection if ordered by the appellate authority, it will be declared an ELV.

The CVs undergo fitness test every two years for the first eight years and annually thereafter. In case of private vehicles, the first registration is valid for 15 years and the renewal is valid for five years.

Private (non-transport) vehicles will be declared as ELVs if found unfit in the fitness test, re-test and re-inspection, if ordered by the appellate authority at the time of renewal of registration.

Various incentive and disincentive mechanisms have been included in the policy to persuade ELV owners to go in for scrapping of older vehicles.

Incentives

The scheme provides incentives to owners of old vehicles to scrap their unfit vehicles through registered scrapping centres. Some of the incentives include:

n Scrap value for the old vehicle, which is approximately 4-6 per cent of the ex-showroom price of a new vehicle.

n The state governments have been asked to offer a road tax rebate of up to 25 per cent for personal vehicles and up to 15 per cent for commercial vehicles.

n The vehicle manufacturers are advised to provide a discount of 5 per cent on the purchase of a new vehicle against the scrapping certificate.

n Registration fee will be waived on the purchase of a new vehicle against the scrapping certificate.

Disincentives

n Increased fee for fitness test and issuance of fitness certificate for commercial vehicles, which are more than 15 years old.

n Increased re-registration fee for private vehicles which are more than 15 years old.

End-of-life vehicle

A vehicle failing the fitness test or failing to get a renewal of its registration certificate may be declared as an end-of-life vehicle. The criteria to determine vehicle fitness will be primarily emission tests, braking, and safety equipment, among many other tests which are as per the Central Motor Vehicle Rules, 1989.

Policy proposals

Under the policy, it has been proposed that all vehicles of the Central government, state governments, municipal corporations, panchayats, state transport undertakings, public sector undertakings and autonomous bodies with the Union and state governments may be de-registered and scrapped after 15 years from the date of registration.

Reality check

According to information, the government has so far approved 72 such registered vehicle scrapping facilities (RVSFs) across 16 states and Union Territories. Of these, 34 are in Uttar Pradesh alone, six in Haryana and five each in Gujarat, Bihar and Madhya Pradesh, though only 38 of such facilities are currently operational.

Sumit Issar, managing director, Mahindra Accelo Ltd, a subsidiary of Mahindra & Mahindra, says, “The policy aims to create a sustainable vehicle recycling industry in India. On the one hand, it has defined the criteria for determining the fitness of old vehicles and mandatorily scrapping unfit vehicles. On the other hand, it has proposed various incentives for scrapping vehicles when done from a registered vehicle scrapping facility like CERO.”

CERO is India's first organised vehicle recycler (a joint venture between Mahindra Accelo and MSTC Ltd, a Government of India enterprise). It recycles ELVs in an environment-friendly way using world-class technology and processes.

Mahindra MSTC Recycling Pvt Ltd. (CERO) has eight modern recycling facilities in key cities across India and more are coming up shortly. “Our average capacity is 15,000 to 20,000 cars per year per recycling facility, which is more than enough to cater to the current needs of this industry. Additionally, we can increase this capacity at any point with very little lead time. We have plans to expand consistently across India and be present in 100 cities in the next two-three years via our network of modern recycling facilities and collection centres.”

When asked how this policy will help in getting rid of pollution, Issar said: “The policy aims to incentivise scrapping of old vehicles, which, in turn, will lead to reduction in vehicular pollution. The policy also aims to formalise the unorganised recycling industry, which will reduce pollution caused by the unorganised vehicle recycling.”

“In states where there is a clear regulation/policy, we are witnessing more interest and readiness from consumers but there are challenges in terms of awareness and operational issues. Also, the incentives announced have not yet been rolled out in all states. Going forward, we expect things will streamline with governmental efforts,” he added.

On the number of people coming forward for scrapping their vehicles, he said: “It varies from city to city depending on policy implementation. Overall, we are getting a good response from metro cities.”

Another auto major, Tata Motors, has franchised RVSFs across India under the Re.Wi.Re brand. Currently, it has three active RVSFs operational at Jaipur, Bhubaneswar and Surat, with a combined capacity to disassemble over 40,000 end-of-life passenger and commercial vehicles per annum.

The company recently opened its fourth vehicle scrapping facility at Morinda in Punjab with a capacity to handle 12,000 vehicles per annum. While inaugurating the Morinda facility, Tata Motors’ managing director Shailesh Chandra said: “As many as 15 more such facilities are in the pipeline and we intend to have 35 vehicle scrapping facilities in four-five years.” He added that the company would create awareness among the masses with the help of stakeholders like channel partners about the benefits and incentives of the scheme.

A Tata Motors’ spokesman said: “These facilities are equipped with advanced technology to ensure efficient and environmentally-responsible vehicle scrapping. Committed to meeting the growing demand for vehicle scrapping services in India, we plan to further expand the network of RVSFs across the country. The initial response from customers interested in scrapping their ELVs has been positive and encouraging.”

“The vehicle scrapping policy is a comprehensive and well-designed initiative that is anticipated to have a significant positive impact on air quality and environmental health in India. The policy aligns with the government’s commitment to achieving the country’s net-zero targets. As per estimates, a 15-year-old vehicle may generate pollution four to six times higher than a new one. By removing these vehicles from the roads, the vehicle scrapping policy is expected to significantly reduce emissions of harmful pollutants. The policy also provides incentives for the purchase of new vehicles, aiming to encourage the adoption of greener and cleaner technologies that emit significantly lower levels of pollutants than older vehicles,” the spokesman added.

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