NATIONAL AUTOMOBILE SCRAPPAGE POLICY – COMPLETE GUIDE

India’s National Automobile Scrappage Policy: Driving Sustainability and Economic Growth

In August 2021, the Government of India announced the National Automobile Scrappage Policy – a groundbreaking initiative to replace ageing vehicles with new ones while promoting environmental sustainability and supporting the automobile industry.

This policy represents a paradigm shift in how India manages vehicle life cycles and environmental concerns. It incentivises owners to retire old, polluting vehicles and purchase new, efficient ones, creating a win-win situation for the environment, the economy, and vehicle owners.

What is the National Automobile Scrappage Policy?

The scrappage policy is a government scheme to encourage owners of old vehicles to voluntarily scrap their vehicles in exchange for financial incentives and benefits.

Core Objectives:

Environmental Impact:

• Reduce emissions from aging, inefficient vehicles
• Decrease air pollution, particularly in metropolitan areas
• Promote sustainable transportation

Economic Stimulus:

• Boost automobile industry demand
• Create employment in scrapping facilities and new vehicle sales
• Increase government revenue through GST on new vehicles

Vehicle Safety:

• Remove unsafe, poorly maintained vehicles from roads
• Reduce accidents caused by mechanical failures

Industry Support:

• Stimulate demand in the automobile sector during slowdown periods
• Create a market for new vehicles

Eligibility Criteria for Vehicle Scrapping

Vehicle Requirements:

Commercial Vehicles:

• Minimum 10 years old (from date of registration)
• Must be registered with the transport authority

Personal Vehicles (Cars, SUVs):

• Minimum 15 years old from the date of registration
• Must have valid registration

Two and Three-Wheelers:

• Minimum 15 years old at registration
• Specific eligibility conditions apply

Condition of Vehicle:

• The vehicle must be in running condition
• No condition about accident or damage history (though severely damaged vehicles may be rejected)
• The vehicle should be roadworthy to reach the scrapping facility

Documentation Requirements:

• Valid RC (Registration Certificate)
• Proof of ownership
• Valid insurance (preferable)
• PUC (Pollution Under Control) certificate
• No pending loans or legal disputes on the vehicle

Financial Incentives Under the Policy

The policy offers substantial incentives for scrapping vehicles:

Trade-in/Scrap Value:

The government offers standardised scrap values based on vehicle type and age:

Passenger Vehicles:

• Vehicles 15-19 years old: 4-6% of the original price
• Vehicles 20+ years old: 6-8% of original price

Example: A ₹10 lakh car purchased 16 years ago might fetch ₹40,000-50,000 as scrap value.

Commercial Vehicles:

• Scrap value: Higher than that of passenger vehicles due to material value
• Commercial vehicles 10-14 years old: 6-8% of the original price
• Commercial vehicles 15+ years old: 8-10% of original price

Additional Tax Incentives:

When purchasing a new vehicle, a scrappage policy offers the following:

GST Exemption:

• 25% GST exemption on purchase of a new vehicle (in some scenarios)
• Reduces the effective cost of a new vehicle

Registration Fee Exemption:

• Exemption from new registration fees
• Saves approximately ₹3,000-10,000 depending on vehicle type

Example Cost Savings:

Suppose you own a 16-year-old ₹10 lakh car:

Without the Scrappage Policy:

• Car resale value: ₹2-3 lakhs
• Cost of new car: ₹8-10 lakhs
• Total investment: ₹5-8 lakhs additional

With the Scrappage Policy:

• Scrap value: ₹40,000-50,000
• GST benefit on new car: ₹50,000-100,000
• Registration fee savings: ₹5,000
• Total benefits: ₹95,000-155,000

Net savings: ₹1-1.5 lakhs approximately

Implementation and Authorized Scrapping Centers

Authorised Vehicle Scrapping Facilities (AVSFs):

The government has authorised specific scrapping facilities across India:

Facility Requirements:

• AVSF must meet the Ministry of Road Transport standards
• Must have proper environmental compliance
• Must follow dismantling and disposal procedures
• Must issue a scrapping certificate

Current Authorised Facilities: Approximately 140+ AVSFs are operational across India as of 2024, with more being added.

State-wise Distribution:

• Maharashtra: 20+ facilities
• Uttar Pradesh: 15+ facilities
• Gujarat: 12+ facilities
• Tamil Nadu: 10+ facilities
• Other states: Scattered facilities

Process at Scraping Centres:

1. Vehicle inspection and assessment
2. Document verification
3. Deregistration from RTO
4. Physical scrapping and material recycling
5. Issuance of the scrapping certificate
6. Payment of scrap value (usually after 2-4 weeks)

Application and Implementation Process

Step-by-Step Process for Vehicle Owner:

Step 1: Identify Authorized Scrapping Facility

• Check the government’s VAHAN portal for the nearest AVSF
• Verify facility credentials
• Inquire about the process and timeline

Step 2: Visit the Scraping Facility

• Bring vehicle RC, insurance, PUC, and ownership proof
• Get the vehicle inspected
• Receive a quote for scrap value

Step 3: Submit Documents

• Submit original RC and supporting documents
• AVSF processes the deregistration request with RTO
• Receive acknowledgment

Step 4: Vehicle Scrapping

• Schedule the vehicle scrapping date
• Drive vehicle to facility (or arrange transport)
• Physical scrapping and material recycling
• AVSF receives a scrapping certificate from RTO

Step 5: Receive Payment and Benefits

• Receive scrap value payment (usually 2-4 weeks)
• Obtain a scrapping certificate
• Use the certificate and scrap value for a new vehicle purchase
• Claim GST benefits at the dealer

Step 6: Purchase New Vehicle

• Select a new vehicle from a participating dealer
• Provide a scrapping certificate
• Dealer helps process GST exemption and other benefits
• Complete new vehicle registration

Timeline: The complete process typically takes 4-8 weeks from the scoping decision to the new vehicle purchase.

Impact and Performance of Scrappage Policy

Adoption Statistics:

As of December 2024:

• Approximately 350,000+ vehicles have been scrapped under the policy
• Expected to reach 1 million by 2025
• Commercial vehicles: Higher adoption rate (30-35% eligible vehicles)
• Personal vehicles: Lower adoption rate (5-8% eligible vehicles)

Despite financial incentives, the adoption of the scrappage policy by personal vehicle owners remains low:

Sentimentality:

• People are emotionally attached to personal vehicles
• Often view vehicles as investments rather than consumables

Alternative Options:

• Higher resale value in the private market vs. scrap value
• Even 16-year-old car can fetch ₹3-4 lakhs in used market vs. ₹40,000-50,000 scrap value

Purchase Unwillingness:

• Even with incentives, the new vehicle cost is substantial
• Many owners continue using old vehicles indefinitely

Commercial Vehicle Adoption: Commercial vehicles have higher adoption due to the following:

• Business cost considerations
• Fleet management efficiency
• Tax benefits for businesses
• Wear and tear on commercial vehicles

Environmental Impact

Emissions Reduction:

Each 15+ year-old vehicle removed from roads reduces annual emissions:

CO₂ Reduction:

• Average car: 5-6 tonnes of CO₂ annually
• Commercial vehicle: 10-12 tonnes of CO₂ annually

Particulate Matter Reduction: Older vehicles (pre-2000) emit significantly higher particulate matter (PM2.5 and PM10).

Target Impact: If 1 million vehicles are scrapped by 2030, the estimated annual emissions reduction is 5-6 million tonnes of CO₂ equivalent.

Material Recycling:

Scrapped vehicles provide recyclable materials:

• Steel: 75% of vehicle weight
• Aluminum: 5-8%
• Plastics: 8-10%
• Other materials (glass, fluids): Remaining

Recycling rate at authorised facilities: 85-90%.

Challenges and Criticisms

Low Adoption Among Personal Vehicle Owners:

The primary challenge is convincing personal vehicle owners to scrap vehicles:

Weak Incentive Structure:

• Scrap value is significantly lower than the used market value
• Even with benefits, incentives don’t justify scrapping

Used Car Market Competition:

• A robust used car market offers higher values
• Owners prefer selling to private buyers

Structural Issues:

Limited Scrapping Facility Network:

• Only 140+ facilities for 300+ million vehicles on roads
• Inconvenient locations for many owners

Awareness Gap:

• Many owners are unaware of the policy’s existence
• Lack of active government promotion

Implementation Bottlenecks:

• RTO coordination delays
• Deregistration process bureaucratic
• Payment delays at facilities

Environmental Concerns:

Informal Scrapping:

• A significant portion of old vehicles is scrapped informally
• Improper disposal of toxic materials
• Environmental pollution from informal scrapping

Integration with Formal System:

• Bringing informal scrapping into the formal system challenging
• Requires coordination between AVSF and informal operators

Future Outlook and Improvements

Government Initiatives:

Facility Expansion: The government aims to increase scrapping facilities to 500+ by 2030.

Technology Integration:

• Digital tracking of scrapped vehicles
• Real-time benefit processing
• Online application systems

Enhanced Incentives:

• Potential increase in tax benefits
• Possible subsidy enhancement for EV purchases with scrapping

Commercial Vehicle Focus: Given better adoption in the commercial segment, policy may focus on fleet replacement programmes.

Reasons for Low Personal Vehicle Adoption:

faq

Q: What is the minimum age for vehicle scrapping under this policy? A: Commercial vehicles must be 10+ years old. Passenger vehicles and two/three-wheelers must be 15+ years old.

Q: How much compensation will I get for scrapping my vehicle? A: Scrap value typically ranges from 4 to 8% of the original vehicle price, depending on vehicle type and age. A ₹10 lakh car might fetch ₹40,000-80,000.

Q: Is the scrappage policy mandatory? A: No, it’s completely voluntary. Vehicle owners can choose to scrap or continue using their vehicles.

Q: What GST benefits are available under the policy? A: Eligible buyers may receive up to a 25% GST exemption on a new vehicle purchase when scrapping an old vehicle.

Q: How long does the scrapping process take? A: The complete process typically takes 4-8 weeks from the scoping decision to final benefits receipt.

Q: Can I scrap a vehicle with an outstanding loan? A: No, the vehicle must be loan-free. A lender’s No Objection Certificate (NOC) is required.

Q: Where are authorised scrapping facilities located? A: Check the government’s VAHAN portal for authorised vehicle scrapping facilities (AVSFs) near your location.

Q: Will scrapping my vehicle affect my insurance? A: Scrapping deregisters the vehicle, making the existing insurance void. New insurance is required for the new vehicle.