India's Vehicle Scrapping Policy: A Roadmap to Sustainable Mobility

India's automotive industry has been growing rapidly, due to an increase in the need of consumers to move faster and smarter. Millions of new vehicles are being purchased every year. This growth leads to economic growth and enhanced connectivity, but it also causes serious problems like road accidents, congestion, and, more critically, air pollution through vehicular exhaust.

The capital of India, New Delhi, has been declared as the most polluted city in the world several times, along with many Indian cities. It is estimated that vehicular emissions are directly responsible for 70% of emissions in the city, affecting the lungs, causing major health hazards.

The automobile sector contributes almost 10% of India's overall greenhouse gas emissions. The outdated vehicles are exacerbating this issue. In order to solve this problem, the government has introduced the Vehicle Scrapping Policy in year 2021, which is one of the major reforms for phasing out outdated and polluting vehicles while promoting eco-friendly auto technologies by offering some incentives or rebates. This will create a new recycling industry, having the ability to employ millions of skilled people and changing the future of the automobile sector.

The authors have highlighted in this article the significance of the Vehicle Scrapping Policy and the essential compliance standards it sets forth. It will then explore the real-world difficulties and problems encountered when putting the policy into practice. Through a critical analysis, the authors hope to draw attention to the shortcomings of the current framework and offer potential, well-thought-out fixes to enhance the efficacy and application of the policy.

What is Vehicle Scrapping?

The term 'scrapping', in layman's language, means dismantling old and polluting vehicles that have attained the End-of-Life Vehicle (‘ELV’) stage. The process involves dismantling unfit, polluting vehicles and using their reusable parts in new vehicles or for other industrial purposes. This also involves disposing of non-recyclable elements properly and giving a ‘Certificate of Scrapping’ to the owner. The certificate allows consumers to claim concessions and rebates offered by the government. This policy creates an organised mechanism for scrapping, supplanting previous informal and unregulated scrapping procedures.

Tracing the Evolution of Vehicle Scrapping in India and the Rationale Behind the Voluntary Vehicle Fleet Modernisation Programme (V-VMP)

India’s scrapping policy was initially proposed by Minister Nitin Gadkari in 2016. The Ministry of Road Transport and Highways created the draft of the Voluntary Vehicle Fleet Modernisation Programme (V-VMP). The plan was to phase out 15-year-old commercial vehicles and 20-year-old personal vehicles of Bharat Stage (BS) III emission norms and replace them with cleaner vehicles. The Ministry of Finance was against the proposal, arguing the cost of giving tax rebates to more than 28 million car owners would not be economically viable, but that proposal remained on life support because it made sense and only needed a few changes.  

India needed this policy to curb vehicular pollution by taking away its fast-growing number of ageing vehicles from Indian roads. Government estimates reveal that close to 65% of motor vehicle pollution in India is contributed by aged commercial vehicles over 15 years old. Such old vehicles emit very high amounts of carbon dioxide, nitrogen oxides, and particulate matter in comparison to new vehicles, leading to many lung and respiratory-related health issues. They also use more fuel and are more prone to mechanical failure, which can result in road accidents. Failure to implement this policy would possibly affect the public health, economy and India's own ambition of sustainable growth.

Another important concern was India's shift in emission standards. India transitioned from BS-I in 2000 to BS-VI in 2020, skipping BS-V altogether as directed by the Supreme Court. This jump resulted in the fact that cars made before BS-IV or BS-VI norms are far more polluting and inefficient. Scraping old vehicles is thus imperative not just for clear air but also for enabling India to achieve its emission-free goals.

In the Union Budget 2021, Finance Minister Nirmala Sitharaman formally introduced the National Vehicle Scrappage Policy. Under the policy, private cars over 20 years and commercial vehicles over 15 years have to go through compulsory fitness tests at automated facilities. If they are found to be unfit, they will be scrapped. 

Under the Vehicle Scrapping Policy, 2021, Owners scrapping their vehicles can expect up to 4–6% of the ex-showroom price of the vehicle as scrap value. Additionally, state governments have been advised to provide a road tax rebate of upto 25% for personal vehicles and 15% for commercial vehicles. The policy also provides a complete waiver of registration fees for the purchase of new vehicles. On top of that, Original Equipment manufacturers (OEMs) are expected to extend a discount of around 5%. When combined, these measures could lower the effective cost of buying a new vehicle by roughly 10 –15%.

The shares of top automobile companies like Tata Motors, Maruti Suzuki, and Mahindra & Mahindra got huge subscriptions, reflecting industry sentiment. Experts forecast that the scrappage policy would create a fresh demand for vehicles, particularly in the commercial segment, and also drive the passenger automobile and electric vehicle (EV) markets.

Policy in Practice: Registration Requirements and Comparative Perspectives

The policy’s most salient feature is the creation of Registered Vehicle Scrapping Facilities (RVSFs) all over India. In contrast to unorganised scrapyards that function without environmental controls, RVSFs are legally constituted entities with more stringent compliance. They need sound machinery and skilled personnel to scrap and dismantle vehicles systematically. To apply for registration, an RVSF needs to obtain a state government permit, achieve ISO 9001 certification, and work in a location that falls under the orange category, according to environmental standards.

The National Informatics Centre (NIC) provide a single window clearance for the registration. To apply for registration, an interested person needs to submit land acquisition documents, GST registration, and PAN card information and submit a security deposit of ten lakh as a bank guarantee. RVSFs, after registration, will be provided access to the Vahan database maintained by the government to provide official scrapping certificates. This will also help in vehicle identification as the database is linked to the National Crime Records Bureau to prevent the illegal scrapping of stolen vehicles. The Central Pollution Control Board (CPCB) has also set minimum technical guidelines for dismantling to ensure that scrapping takes place in an environmentally friendly manner.

India isn’t the first country in the world to have such a policy. The European Union had its End-of-Life Vehicles (ELV) Directive in 2000, making it mandatory for a scrapped vehicle to be recycled. It enforced Extended Producer Responsibility (EPR). EPR means OEMs have obligations to legally and financially monitor the end-of-life phase of their vehicles. They are supposed to create sustainable disposing and recycling infrastructure for used cars of their brand. This directive compels manufacturers to research and innovate in designs encouraging use of recyclable components and extending vehicle life cycles. There have been legal uncertainties about how much OEMs are responsible for vehicles sold before the directive was implemented. Some car makers disputed the costs of recycling older vehicles. India does not legally require EPR in the automobile sector. There is no law that mandates manufacturers to take back ELVs or support scrapping infrastructure.

In Japan, the Automobile Recycling Law 2005 enforced recycling through fees levied from customers. The United States has a market-based mechanism for recycling; wherein private sector companies undertake scrapping under government supervision to eliminate emissions from vehicular exhaust. India's model is relatively different in terms of combining incentives and tax rewards for voluntary scrapping with strict compliance enforcement through RVSFs for formalising the industry.

The financial effect of the scrappage scheme is anticipated to be significant. This initiative of the Indian government would generate around ₹10,000 crore in tax collection due to an increase in demand for new vehicles. At the same time, recycling steel, aluminium, plastics, and special metals from scrapped cars will reduce import dependency on foreign countries. As of now, India is the second largest producer of steel with approximately 110 million tons. By implementing the Vehicle Scrappage Policy in India, the scrap available can make the Government to increase the productivity of steel to 300 million tons by 2030.

Minister Nitin Gadkari informed that the recycling of steel alone would bring down the cost of car production, making cars competitive even in the international markets. Moreover, the policy will generate ample new job opportunities in scrapping, dismantling, recycling, and ancillary industries. The policy is also in tune with India's environmental agenda. Phasing out outdated, polluting vehicles is important to comply with India's ‘Nationally Determined Contributions’ (NDCs) to the Paris Agreement and its target of achieving Zero Carbon emissions by 2070. By connecting scrapping with more incentives for electric vehicles and hybrid cars, India can accelerate the transition to clean mobility. Several experts believe that scrapping will facilitate the adoption of Electric vehicles if the government encourages the same through the right policies and creates charging infrastructure. This will decrease urban air pollution significantly.

Challenges in the Implementation of Vehicle Scrapping Policy

Lack of Awareness and Public Participation

Experts also believe that a lack of awareness about this policy among people would lead to them getting their car dismantled at the informal scrapyards rather than scrapping it at a registered facility. The Government needs to create awareness about this policy by offering enticing rebates and advertising it through newspapers, social media, and government websites in English, as well as the local languages of respective states.

Dominance of the Informal Sector

The current dominance of informal scrapers is another big problem, as they opt for unsafe methods without any concern for harming the environment. These informal players have a strong market presence, low costs, and skilled workers. They can offer value if they are included in the formal system. RVSFs' infrastructure needs to increase rapidly throughout all states to make the policy a success at a national level. Effective coordination between the State and Central governments, uniformising incentives, and awareness campaigns will be key requirements for seamless implementation of this policy.

Inadequate Rebate and Concession

The current scrappage benefits are modest and may not be encouraging enough for someone to voluntarily scrap outdated vehicles. The government need to offer exciting benefits on scrapping to make this policy a great success. More benefits need to be granted for the purchase of an electric vehicle as they are costly and need high maintenance.

Insufficient Number of RVSFs

The network of RVSFs is still inadequate and unevenly distributed, especially in rural and semi-urban areas. This creates implementation issues for vehicle owners in accessing a legally constituted scrapping facility. The government can reduce registration requirements and procedural delay in approving licensing for Scrapping facility. Subsidies, low-interest loan or tax exemptions can be provided for establishing RVSF’s, especially in underserved regions.

Summary and Way Forward: Vehicle Scrapping Policy in India

In spite of all these issues, this policy is a win-win situation for the consumer, OEM and the government. The vehicle owners get concessions, safer vehicles, environmentally friendly auto tech; industries get raw material and new business avenues; and the government gets more tax collection. This will bring India closer to a circular economy model where waste is recycled and reused to the maximum extent, and sustainability is achieved at the core.

If implemented well, India's Vehicle Scrapping Policy could prevent road accidents and also could turn the automobile sector into an environmentally friendly, more competitive industry. It can make India a case study for vehicle recycling, reduction of pollution, and push the nation toward sustainable mobility. This effort, in the coming years, might be remembered as a turning point for India, where it grows responsibly and cleanly. It can position India as a world leader in vehicle recycling, substantially lower pollution, and accelerate the nation's transition towards sustainable mobility.

Retirement of old, pollution-spewing vehicles will reduce harmful emissions such as particulate matter (PM2.5), nitrogen oxides, and carbon monoxide. These toxins are associated with respiratory disease, cardiovascular disease, and premature mortality. Cleaner air will have a direct impact on the quality of life for millions of Indians, especially in cities where pollution rates are frighteningly high. The policy is also supportive of climate objectives by lowering the emissions of greenhouse gases and promoting recycling, thereby relieving natural resources of some of the pressure. If the policy is implemented in a timely manner and effectively, India can reap the advantages of improved health and a cleaner environment, apart from becoming a benchmark for other developing countries.

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This blog is authored by Abhijit More, Assistant Professor of Law, MNLU Mumbai and Atharva Angale, third-year student at MNLU Mumbai. It is a part of RSRR's Excerpts from Experts Series.