India is set to introduce a new vehicle scrapping policy, as announced by Prime Minister Narendra Modi at the Gujarat Investor Summit last Friday.
In the face of production decline and subdued sales volume, the auto industry has long pushed for the implementation of just such a measure.
Considered one of the fastest growing sectors in the Indian economy, with a projected job growth of 65 million by 2026, the automobile vehicle market is also a major indicator for the economic health of the country. (In 2018, the Indian automotive industry contributed to 49% of the country’s GDP.)
However, the economic crisis coupled with the onset of the pandemic led to a steep fall in commercial vehicle sales in India, with the country currently being far from resurgent despite early recovery signs.
As of 2020, India sported about 5,2 million passenger vehicles older than 13 years on its roads, the average lifespan of a car driven on Indian roads being 25 years, according to GlobalData’s Automotive Intelligence Center.
The new policy is intended as an economic boost to the sector, the aim being to phase out old, defective and polluting vehicles, thereby reducing carbon emissions whilst improving on road safety.
As such, vehicles will have to undergo fitness tests and acquire fitness certificates in order to continue operating on roads, with commercial vehicles up for a test after 10 years and private vehicles after 15 years. According to government estimation, these lifespans prove a cut-off point for vehicles more likely to be polluting on account of featuring older technology.
Cars that don’t pass their fitness tests are inevitably scrapped whilst those that pass are issued with renewal certificates, also being mandated to undergo recurring tests every five years. Should the cars fail to pass one of these penultimate tests, they, too, will be scrapped.
According to Modi, who addressed a series of potential investors and industry players interested in financing the necessary vehicle financing infrastructure needed to ensure the successful implementation of the new legislation, the policy will ensure that cars set to drive in India are up to 21st century standards when it comes greenhouse gas emissions.
He also stressed that the policy would render India’s manufacturing industry self-sufficient.
"We imported scrap steel worth Rs 23,000 crore last year because recovery of metals in our country is not enough. With this policy, we can now recover even rare earth metals in a scientific manner. We have to reduce our dependence on imports. For that, the industry needs to put in some extra efforts," he said.
This opinion was seconded by Union Minister for Road Transport and Highways, Nitin Gadkari, who claimed that the recovery of metal waste via scrapping would bring down raw material costs by 40%.
“It will make components less expensive and increase our competitiveness on the international market.”
There are currently 10 million unfit vehicles in the country that can be immediately recycled.
The development of Alang in Bhavnagar (Gujarat), a major Indian ship recycling hub and considered the world’s largest ship breaking yard, into a scrap metal recycling hub for vehicles was similarly stressed by Modi during the summit as a further means to strengthen the automobile and metal sector.
Tantamount to the law’s success are supporting policies by state governments as well as the establishment of a robust scrappage infrastructure.
The Vehicle Scrappage Policy (officially known as the Voluntary Vehicle-Fleet Modernization Programme) will be implemented as of October 1, 2021.