Vehicle Scrappage Policy in India
Nov 25, 2021

Vehicle Scrappage Policy 2021

The vehicle scrappage policy 2021 has been introduced by the Prime Minister of India in Gujarat at an Investor Summit. The launch of the vehicle scrappage policy is expected to set a milestone for the development journey of our country. The Nitin Gadkari vehicle scrappage policy aims to provide a much-needed boost to the automotive and manufacturing industry of the nation.

What is the New Vehicle Scrappage Policy in India?

The vehicle scrappage policy 2021 will help to find the vehicles that are not fit for taking on the roads. As the name suggests under the new scrappage policy the old and unfit vehicles, creating pollution and harming the environment will be scrapped. The vehicle scrap policy will begin as soon as the car registration gets over. After a defined period, the vehicle will undergo a fitness test. As per the Motor Vehicle Laws in the nation, a vehicle is considered fit for 15 years only. Once the vehicle crosses 15 years, the vehicles begin polluting the environment when compared to any new vehicle. Commercial and passenger vehicles older than 15 and 20 years respectively will be scrapped when they fail the fitness test without any question.

What is the Objective of Vehicle Scrappage Policy 2021?

The key objective behind the new scrappage policy is to figure out those unfit vehicles and methodically recycle them. The eventual aim behind the scrap policy is to eliminate the pollution in the environment caused by such vehicles. The unfit vehicle creating pollutions are a big hindrance to the development of the country. This car scrappage policy will reduce pollution and also provide other benefits. It means that it will enable to recycling of things such as steel, plastic, and other metals. The manufacturing cost will also be reduced. With the vehicle scrappage policy in place, it is expected that the vehicle sale will increase. Most importantly, recycling the old car will lead to getting incentives for buying a new vehicle with the successful implementation of the vehicle scrappage policy.

When Will the Vehicle Scrappage Policy Come into Effect?

The Ministry of Road Transport and Highways of India is planning to promote the setting-up of the Registered Vehicle Scrapping Facility across the country. It will also encourage private and public participation in opening such centers. The table below shows the tentative timelines for the application of the proposed vehicle scrappage policy 2021:
Aspects Tentative Dates
Rules for fitness tests and scrapping centers 01 October 2021
Scrapping of the government and PSU vehicles above 15 years 01 April 2022
Fitness testing for heavy commercial vehicle 01 April 2023
Fitness testing for other categories 01 June 2024
  The vehicles that are older than 20 years will be deregistered from 01 June 2024 for the private vehicles. It will happen only when they have failed the test or the registration certificate has not been issued. The commercial vehicles that are older than 15 years will likewise be deregistered from 01 April 2023 onwards.

What are the Benefits of Vehicle Scrappage Policy 2021?

Now, let us take a look at the expected following benefits of the new scrappage policy:
  • Scrapping unfit vehicles mean better air quality and less air pollution
  • As the old vehicles will be scrapped, demand will be there for new vehicles
  • With the car scrappage policy implemented, there will be job opportunities. For instance, manpower will be required for the scrapping of vehicles
  • The vehicle owners might also avail tax benefits as an incentive when scrapping the old vehicle
  • The industry of recycling will lead to high revenue
  • The new vehicles will be safe in comparison to the old vehicles

What is the Categorization of Vehicles for the Scrappage Policy?

On the Indian roads, there are different types of vehicles that can be found being driven. The same rules cannot be applied to all cars because of diversification. Hence, there is a need for the categorization of vehicles when it comes to implementing the vehicle scrappage policy 2021.

Commercial Vehicles

All the vehicles used for commercial purposes such as buses or any transport vehicles come under the category of commercial vehicles.  Once the vehicle completes 15 years, it will need to undergo a fitness test. If the vehicle is unfit, the vehicle will be scrapped as per the vehicle scrappage policy 2021 rules.

Government Vehicles

In January 2021, the vehicle scrappage policy was approved for government vehicles. The vehicle that belongs to the central and state government and is more than 15 years old will be scrapped. This will come into effect in the coming year. As of now, the set date is April 01, 2022.

Private Vehicles

The vehicles used to commute from one place to another almost daily come under the category of private vehicles. The private vehicles will be de-registered after 20 years when found either unfit or fail to renew the RC. However, as a disincentive measure, increased re-registration fees will be charged for the vehicle 15 years onwards from the initial registration date.

Vintage Vehicles

The vintage vehicles are older when compared to an average vehicle. However, the vintage vehicles are driven less yet maintained well. So, all in all, it is a separate category, and the nature of such vehicles will be considered in regards to the directives around scrapping them.

What is the Fitness Test Under the Vehicle Scrappage Policy?

  • The fitness test determines if the vehicle is fit to run beyond the technical lifespan. A fitness test is nothing but a detailed examination that determines the roadworthiness of the vehicle.
  • It also determines whether the vehicle is contributing factor to environmental pollution. The old vehicle needs to undergo a series of safety examinations such as engine performance, braking, and various other tests. The fitness tests will be conducted at automated fitness test centers under the vehicle scrappage policy.
  • We often check the vehicles' emission level through the Pollution Under Control test. Likewise, now you need to put the vehicle via an automated fitness test after a stipulated period.
  • The validity for such a test will be five years. Post this, the vehicle is supposed to undergo another test.
  • A green cess approx. 10-25 percent of road tax, which varies as per each location, might also be charged. The old vehicles need to renew the registration leading to more expenses.
  • Failing the fitness test implies that problems will be caused when it comes to renewing the registration of the vehicle. Any vehicle that fails the test will be considered unregistered under the scrap policy. As per the laws, driving any unregistered vehicle on the Indian road is an offense.
  • The obvious option for a vehicle owner in any such case is to scrap the vehicle. If not this, then repair the vehicle so it passes the fitness test. Follow the process and make payments for renewing the registration.

Where Should I Get the Vehicle Tested or Scrapped?

Check the RC expiration date of the car. If the date is nearby visit a registered automated vehicle inspection center if you wish to keep the car. Or to dispose of visiting a scrapping station is recommended. The government plans to set up proper inspection centers for the initial phase of the vehicle scrappage policy 2021 implementation. Some of the centers have already been open. Anyone who is looking forward to scrapping the car, wait for the registered scrapping center. The scrapping facilities and inspection centers are expected to be connected to the VAHAN database. As of now, the complete testing procedure has not been outlined yet for the car scrappage policy. The procedure of inspection is similar to the safety and emission process of testing in various other countries. You could expect safety equipment check in the car like airbags, seatbelts, pollution tests, and other tests such as the headline alignment checks. Expect authorities to test car brakes and engine components, electronic components, or structural damage and rust.

What is the Process to Get the Car Scrapped?

There are automotive scrapyards that are spread across all cities and towns. To avail of the incentives under the vehicle scrappage policy 2021, one needs to register the car at an authorized scrapping station. The information in regards to the car will be looked at on the VAHAN database. Check the identity and do carry all important papers related to the car. Once the verification process is completed, a certificate of the scrapping will be handed. The registered scrapping facility will also remit the scrap value agreed on of the car to the bank account. One can also receive the amount in the bank cheque.

Will All Vehicles That are Beyond the Limit be Scrapped?

All the vehicles need to be scrapped. When the vehicle completes the set limit, it needs to undergo a fitness test. In simple words, fitness determines whether or not the vehicle is fit to run. In case the vehicle fails a fitness test, it will not get the renewal certificate and not be able to ply on the Indian roads as per the vehicle scrappage policy. And when the vehicle passes this test, it will get a renewal certificate and undergo the fitness test every five years.

What Happens to the Car at the Scrapping Facility?

At the scrapping facility, the car is stripped down and the parts are segregated. The fluids are also drained out such as the fuel, engine oil, brake oil, etc. After this, the tyres, wheels, and battery are removed. The infotainment system, engine, alternator, transmission, and the mechanical or electronic subassemblies might be serviceable and can be sold later. It is a labor-intensive manual job. When done properly it surely increases the scrapping centers' profit margins. When the car has stripped most of the parts, further processing is done. The pipes, ac unit, and a heater core that are intact often can be also salvaged. The plastic and glass bits are removed and the paint is sanded off. The remaining shell gets crushed, then shredded, and recycled to form a new metal.

What Happens if the Vehicle Fails the Fitness Test?

In case the vehicle fails the fitness test, it will fall under EOLV. It stands for End of Life Vehicle. The owner will be given the alternative to scrap the vehicle at Registered Vehicle Scrapping Facilities. As of now, the vehicle is entitled to the fitness test thrice. Beyond this, the vehicle will be considered EOLV.

What are the Incentives for Scrapping Old Vehicles?

The government has announced several incentives for scrapping the old and unfit vehicles. Let us have a look at the following incentive benefits under the vehicle scrappage policy:
  • The owners of old and unfit vehicles will receive a scrap value that is equivalent to 4-6% of the ex-showroom cost of the new vehicle that they would buy.
  • If the owner shows the certificate of deposit no registration fees will be charged for the purchase of a new vehicle.
  • On the motor vehicle tax, the state government has been asked to offer concessions. For the transport/ commercial vehicles, the concession could be up to 15% and the non-transport/ personal vehicle up to 25%.
  • The manufacturers of the vehicle are advised to provide a 5% discount on the new vehicle purchase against the deposit certificate.
  • Choosing a new vehicle also indicates low maintenance costs. It also means that the customers will be able to save on fuel as well.

What are the Disincentives of Holding an Old Vehicle?

Holding on to the vehicles that are older than 15 years is going to be an expensive deal.  Moreover, the state will impose the green tax over the road tax that every vehicle owner needs to pay.

How Costly is it Going to be For Owning Old Vehicles?

The overall costs in regards to renewing the old vehicle and undergoing the mandatory fitness test are somewhat on a higher side. A feasible option is to scrap the old vehicle. In the coming times, a certain hike in the fees can also be expected, and considering inflation it can be periodic. Here is a rundown of the costs that can be incurred if the private vehicle is old for more than 15 years:
  • Fee for renewing the registration
  • Fee for the fitness test
  • Road tax
  • Green cess

Fee for Renewing the Registration

The table below shows the new registration renewal charges for the 15-year old private vehicle:
Vehicle The Regular Registration Charges Renewal Charges
Car/ Jeep Rs 600 Rs 5,000
Motorcycle Rs 300 Rs 1,000
Three-wheeler/ Quadricycle Rs 600 Rs 2500
Imported Motor Vehicle Rs 5,000 Rs 40,000
  Disclaimer: Please refer to the official website. As the figures are subject to change. In the below table, highlighted are the renewal fees for the fitness certificate for the 15-year old commercial vehicle:
Vehicle The Regular Registration Charges Renewal Charges
Taxi/Cab Rs 1000 Rs 7,000
Motorcycle Rs 500 Rs 1,000
Three-wheeler/ Quadricycle Rs 1000 Rs 3500
Heavy Goods/ Passenger Rs 1500 Rs 12,500
Medium Goods/ Passenger Rs 13,000 Rs 10,000
  Disclaimer: Please refer to the official website. As the figures are subject to change.

Revised Fee Structure for Conducting Fitness Test & Granting Fitness Certificate

The table below shows the fees structure for conducting a test of a vehicle for grant or renewal of fitness certificates for vehicles older than 15 years:
Type of Vehicle Existing Fees Revised Fees
Light Motor Vehicle Rs 600 Rs 1,000
Medium Goods/ Passenger Vehicle Rs 1,000 Rs 1,300
Heavy Goods/ Passenger Vehicle Rs 1,000 Rs 1,500
  Disclaimer: Please refer to the official website. As the figures are subject to change. Grant or renewal of the fitness certificate for vehicles older than 15 years:
Type of Vehicle Existing Fees Revised Fees
Light Motor Vehicle Rs 200 Rs 7,500
Medium Goods/ Passenger Vehicle Rs 200 Rs 10,000
Heavy Goods/ Passenger Vehicle Rs 200 Rs 12,500
  Disclaimer: Please refer to the official website. As the figures are subject to change. The table below shows the revised fees for re-registration, fitness test, and certificate of the light motor vehicles that are non-transport:
Parameter Present Registration/ Renewal Charges Revised Registration and Renewal Charges
Issue or renewal of certificate registration Rs 600 (For new and registration renewal) Rs 600 (For new registration)   Rs 5,000 (Renewal of registration after 15 years)
Conduction test of the vehicle for grant or fitness certificate renewal for vehicles older than 15 years Rs 600 Rs 1,000 (automated testing)
  Disclaimer: Please refer to the official website. As the figures are subject to change.

How Does Scrapping Affect Car Insurance Policy?

As per the vehicle scrappage policy 2021, private cars that are older than 20 years and commercial vehicles older than 15 years will be deregistered. The vehicles that pass the test can be re-registered. But those vehicles failing the test need to be scrapped. Let us understand how scrapping the car impacts the car insurance policy:
  • The car manufacturers will have the access to industrial materials like steel, aluminum, rubber, plastic, and copper from the scrappage of those unfit vehicles. Now, with access to the low-cost materials of manufacturing, the cost of vehicle manufacturing can be reduced by the manufacturers.
  • When the price of the new cars will be decreased, then most likely the car insurance cost might also be reduced. As the market value of the car, the IDV plays an important role in determining the car insurance prices.
  • There are regulations on the third-party car insurance premium. The third-party claims are high when compared to the own damage insurance claims. Undoubtedly, driving unfit vehicles is a key contributor to third-party claims. With the implementation of the vehicle scrap policy, it is expected that the third-party claims will be reduced as the unfit vehicles will be scrapped.
You can compute premiums for your vehicle using our online car insurance calculator within minutes.
  • The unfit and older cars have surely contributed to a higher incurred claim ratio of the insurance company. Talking about the incurred claim ratio it is the ratio of the total value of claims settled vs the complete value of the premiums that are obtained in a financial year. So, as the unfit cars will be scrapped, the ICR will also decrease.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

Should I Cancel the Car Insurance Before Scrapping My Car?

Before you contact the car insurance company about the cancelation of the policy, the RC of the car needs to be canceled. Get the registration certificate canceled at the RTO. Once the registration certificate of the car is canceled, inform the insurer about the cancelation of the car insurance policy. In case of a refund of the policy, it will be calculated on a pro-rata basis. Yet, if a claim has been raised in the present policy year, the car insurance policy cannot be canceled.

What If I Do Not Cancel the Car Insurance Policy And Have Scrapped the Car?

It is important to cancel the registration certificate of the car at the RTO respectively if the car is to be scrapped. Let us have a look to understand the canceling of the RC of the car and inform the insurance about the scrappage of the vehicle.
  • Prevention of Vehicle Theft: There are good chances that a criminal might use the scrapped car document for a car stolen in case the RC is not canceled. So, when you cancel the RC of the car, the chances of vehicle theft can be avoided.
  • Misusing Car Documents: Once the car is scrapped, the registration certificate has to be canceled immediately. In case the RC is not canceled, fraudulent people can misuse the documents of the car. Such documents give identity to the car to be used for any illegal activity or the vehicles stolen.

For a Scrapped Car, Will I Receive Any Car Insurance Refund?

Take a note, when scrapping the car, RC has to be canceled. When the Regional Transport Office cancels the RC, you can then proceed with the cancelation of the policy. The refunds will be on a pro-rata basis. In case a claim is raised at this point during the policy term, no refund will be received. Ensure that the policy is canceled regardless of whether the claim is raised or not. The car insurance policy needs to be deactivated when the vehicle registration is canceled.

What Does The New Scrappage Policy Mean for Vintage Car Owners?

To promote the heritage of vintage vehicles, the Ministry of Road, Transport and Highways of India formalized the process of registration of vintage motor vehicles in India. With the new scrap policy, it is going to be a hassle-free process. The salient features include the retention of old numbers for the registered vehicles already and fresh registrations in a VA series. The ‘VA’ series will be a unique registration mark. The vintage motor vehicle is permitted to ply on the Indian roads for taking part in any vintage car rally, some technical research, refueling, maintenance, any exhibition, or simply for display.

What are the RTO Rules For Selling Cars as Scrap in India?

The Regional Transport Office has certain rules laid down for scrapping the old vehicles. Scrapping the old vehicle is a wise and safe option. Scrapping the vehicle means that it will be chopped into pieces and recycled. Moreover, the chances of any unauthorized activity also get eliminated. Here is a rundown of some of the most important points in regards to the scrapping process in India:
  • The chassis number of the car is taken out before the scrap is sent for recycling.
  • The car owner should connect with an authorized scrap dealer. The dealers should ensure that the car should be scrapped most safely that does not impact the environment.
  • The car owner should also get in touch with the RTO and inform them about the scrapping as well. One also has the option to deregister the car.
  • The scrap dealer is going to perform a physical inspection and quote the price on the premise of the vehicles’ weight. Once the agreement stage is reached, the scrap dealer will then remove the parts of the car. This will be segregated into plastic, rubber, iron, and so forth.
  • Ensure that the vehicle is scrapped by the scrap dealer. Take pictures of the same for assistance in the future.
Disclaimer: The rules are subject to change.

What are the RTO Rules for Deregistration and Scrapping of Old Vehicle?

Let us now know the RTO rules when it comes to deregistration and scrapping of old vehicles:
  • Write a letter to the RTO informing them about the car scrapping.
  • Surrender the original registration certificate of the car along with the chassis number.
  • The confirmation of the authorized scrap dealer on the letterhead. It should have a complete address without a fail. Also, you could submit pictures of the car during this time.
  • The owner of the vehicle should also submit an affidavit along with the application for deregistration and scrap. The affidavit should cover that the vehicle is not under any insurance claims, loan, pending court cases, or not involved in any theft activity.
The RTO will verify the documents and provide them with further steps. This will happen only after the diligence reports are received from the National Crime Record Bureau and traffic police. This verification is carried to maintain the records at the RTO office regarding the purchase or sale of the car as well. When all the records are found satisfactory, RTO will deregister the car. Disclaimer: The rules are subject to change.

FAQs on Vehicles Scrappage Policy 2021

  1. Do I need to scrap my car after 15 years?

Cars older than 15 years need to undergo a fitness test. If a car fails the fitness test only then it would need to be scrapped as per the new Vehicle Scrappage Policy.
  1. Can we use a car or bike after 15 years?

According to the Central Motor Vehicle Rules, private vehicles need to be re-registered after 15 years and commercial vehicles after 20 years for every 5 years. These vehicles can then ply on Indian roads until they fail the fitness test.
  1. Is the fitness test free of cost?

As per the Nitin Gadkari vehicle scrappage policy 2021, prescribed fees need to be paid for the fitness test. It could go up to Rs 40,000 and is subject to change in the future. As of now, the fees for conducting the fitness test are somewhere about Rs 200 to Rs 1,000 depending on the type of vehicle.
  1. What parameters are checked in for a fitness test?

This fitness test will be conducted to check the fitness of the vehicle plying on the Indian roads. And whether or not it is adversely impacting the environment. Scrapping unfit vehicles mean less pollution and growth opportunities in the automobile sector in India.
  1. Is the vehicle scrap policy applicable to both diesel and petrol vehicles?

Yes, the vehicle scrappage policy applies to both diesel and petrol vehicles.
  1. Is it mandatory by law to scrap an old vehicle?

As of now, it is not mandatory to scrap any old vehicle. It is recommended to scrap the vehicle if it is unfit.
  1. Who will benefit from the vehicle scrappage policy?

The vehicle scrappage policy would benefit around 51 lakh light motor vehicles (LMVs) currently above 20 years of age and 34 lakh more LMVs that exceed 15 years of age as per Nitin Gadkari, Union Minister for Road Transport and Highways. Listed below are the key highlights of the vehicle scrap policy for the automobile sector:
  • Helps to reduce the pollution
  • Sale of new vehicle
  • Job opportunity
  1. Is the scrappage policy voluntary?

The vehicle scrappage policy is voluntary. In case a vehicle does not clear the fitness test and also fails the permitted retest then it will be declared as an EOLV that is End of Life Vehicle.
  1. What are the eligibility factors for which the car can be scrapped?

Under the following conditions, the car is eligible to be scrapped:
  • When the RC of the car is about to be expired
  • When the vehicle fails the fitness test at the registered inspection center.
  • In case the car is irreparably damaged in an accident or natural calamity
  • The car gets impounded
Apart from these, abandoned cars or decommissioned government vehicles can also be scrapped. The scrapping of the car is voluntary, however; it can’t be driven on the roads in case it fails inspection.
  1. Where can you get your car scrapped or tested?

To undergo the fitness test visit a registered automated vehicle inspection center. And to dispose of the vehicle visiting a registered scrapping station.
  1. Will you get a certificate for discarding your vehicle under Vehicle Scrappage Policy?

Yes, under the vehicle scrappage policy you will receive a certificate for discarding the vehicle.
  1. Passed the scrappage test? Here's what you need to do next.

The registration certificate needs to be renewed. It should not be more than sixty days before the expiry date of the registration for continuous use. The following are some of the guidelines that need to adhere:
  • Apply for the registration certificate renewal in Form 25. It should be done to the registering authority under whose jurisdiction the vehicle is and not more than sixty days before the expiry date.
  • Pay all the due taxes on the vehicle.
  • As per Central Motor Vehicle Rules 1989 under Rule 81, pay the appropriate fees.
The table below has the list of all the important documents required:
Form 25 in application
PUC
Fitness Certificate*
Registration Certificate*
Insurance Certificate*
RC Book*
Proof for the payment of road-tax paid till date*
Engine Pencil and Chassis Print*
Copy of PAN card or Form 60/61*
Signature Identification*
  Disclaimer: In some states, the documents marked with asterisks are required. Following the Central Motor Vehicle Rules, the private vehicles need to re-register after 15 years for every five years as long as the vehicle is considered to be fit. Listed below are the key documents that will be required and also understand the process for the re-registration of the vehicle:
  • The duly filled up Form 25
  • Original registration certificate
  • Insurance certificate
  • Pollution Under Control certificate
For inspection, the vehicle then needs to be produced in front of the registering authority. The fess of registration needs to be paid at the counter and a receipt will be issued for the same. A new registration certificate will be then issued by the department.
  1. Do you need to inform your insurer if you scrap your car?

Yes, when you decide to scrap the car, it is important to inform the insurer. The insurance company will cancel the car insurance plan as it will no longer be registered for use on public roads.
  1. Do you need to cancel the Registration Certificate after scrapping your car?

Yes, it is important to cancel the registration certificate after scrapping the car. There are chances that people might use the existing documents of the scrapped car to carry out any illegal activities. This could lead to legal consequences. Canceling the RC prevents any such possible activities. It means that nobody would be able to misuse the identity or information of the car for their benefit.

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