Union Budget 2021-22 focuses on vehicle scrappage: What does it mean

It will help reduce vehicular pollution in urban areas, besides boosting the sale of newer vehicles, including electric ones

By Adithyan PC
Published: Tuesday 02 February 2021

The much-anticipated vehicle scrappage policy announced by Union Minister of Finance Nirmala Sitharaman in her budget speech February 1, 2021 is expected to reduce urban pollution and boost vehicle sales affected by the novel coronavirus disease (COVID-19) pandemic.

Nitin Gadkari, Union Minister for Road, Transport and Highways, later added that the policy would be notified within 15 days. Fifteen-year-old commercial vehicles and 20-year-old personal vehicles will be eligible under the policy.

The policy is voluntary. But vehicles that cross the age limit must undergo a mandatory fitness test. Fitness tests will be conducted at automated centres, Sitharaman said.

Each test will be valid for five years and cost around Rs 40,000. One can only take a fitness test three times and if the vehicle fails in all of the three tests, there is no option for the owner other than sending it for scrappage.

Apart from this, one may have to pay the road tax and possible green tax to make the vehicle road legal.

The proposed green tax may vary from city to city based on their pollution levels. It vwill vary from 10-25 per cent of the road tax to 50 per cent in cities like Delhi that have high levels of air pollution.

Such hurdles may prompt owners to send vehicles for scrappage. Owners who choose to scrap their vehicles will also receive a monetary benefit. If the vehicle fails to pass the test, it will be considered as unregistered, making it illegal for road use.

In India, over 5.1 million vehicles, both commercial and private, are over 20 years, according to the policy. Deporting these vehicles will help reduce vehicular pollution considerably and boost the sales of new vehicles that include electric ones.

An effective scrappage policy and infrastructure can help to reduce the monumental load of over 20 million old vehicles nearing the end of their lives by 2025.

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