Impact of the Upcoming Scrappage Policy

Impact of the Upcoming Scrappage Policy

Post the introduction of the BS-VI emission norms by the government of India, the next big change that the Indian auto sector will witness is the upcoming scrappage policy. The policy has been in the works for quite a while now, and was subject to support and resistance alike from all the stakeholders in the auto sector in the country. Now, if reports are to be believed, the scrappage policy can end up coming into effect sooner than the time it was anticipated to emerge.

The scrappage policy, curated by the Ministry of Road Transport and Highways (MoRTH), has been formulated to phase out old vehicles running on the roads in India. As vehicles run on the roads past their healthy physical status, they end up contributing significantly to air pollution. So in order to protect the environment, the MoRTH came up with the scrappage norm. According to this policy, commercial vehicles that are 15 years of age or older, and private vehicles that are 20 years or older, will be considered for scrapping.

This means that a vehicle will be only allowed to ply on the roads in India if it is deemed mechanically and physically fit. Hence, it is vital for vehicle owners to have regular fitness check ups of their vehicles, and to have a valid vehicle fitness certificate. A vehicle fitness certificate is awarded to a vehicle only when it passes the fitness test. A vehicle that fails the fitness test more than three times automatically becomes eligible to be scrapped, and can be sent for scrapping by the authorities immediately.

With the new scrappage policy coming into effect soon, vehicle owners, whether commercial or private, are advised to have all their vehicles inspected and to have all the documents in place. To simplify the process for vehicle owners, the Ministry of Road Transport and Highways also started the ParivahanSewa portal. Through this portal, users can check and verify vehicle owner details, apply for a fitness certificate online, and make payments for the renewal. Then, they can obtain a fitness certificate at their zonal Regional Transport Office (RTO) by producing the below mentioned documents:

  • Fee receipt of the payment made online
  • Application letter
  • Original registration certificate of the vehicle
  • Insurance documents
  • Valid Pollution Under Control (PUC) certificate

While the policy can end up doing wonders for the environment, the automakers and original equipment manufacturers (OEMs) in the country stand divided. As per speculations, if the draft of the policy rolled out makes it mandatory for the OEMs to provide incentives, the industry can end up witnessing a massive setback. With a dwindling economy and a shaky road towards economic recovery, the automakers can have a significant dent on their revenues. And to balance out this decline, they may have no alternative but to hike up the prices. Along with that, this can potentially lead to impacting the resale value to a certain extent. Any or all rebates or incentives offered by the government in lieu of this policy to the automakers will not be majorly profitable to cover up the external losses that the OEMs can end up facing.