Prime Minister Narendra Modi launched the Vehicle Scrappage Policy while virtually addressing the Gujarat Investor Summit on Friday.

“The launch of Vehicle Scrappage Policy today is a significant milestone in India’s development journey. Vehicle scrapping will help phase out unfit and polluting vehicles in an environment-friendly manner. Our aim is to create a viable circular economy and bring value for all stakeholders while being environmentally responsible,” Mr Modi said.

As the name suggests, the policy will help in phasing out old, unfit vehicles. The scrappage policy will come into effect immediately after the registration period of a vehicle is over. It would then have to undergo a mandatory fitness test. According to the motor vehicle laws in the country, a passenger vehicle has a life of 15 years and commercial vehicles have a lifespan of a decade. Vehicles plying on the roads beyond these durations are considered to pollute the environment at a greater pace compared to newer cars.

Owners who scrap their old vehicle and plan to buy a new one will get incentives as a part of the Vehicle Scrappage Policy. A value of the ex-showroom price of the old vehicle, ranging from 4 per cent to 6 per cent, will be given to the owner when they choose to scrap the vehicle. A rebate of up to 25 per cent of Road Tax will also be given to a person when he buys a new personal vehicle after scrapping an old one. The rebate will be up to 15 per cent for commercial vehicles. In addition, vehicle manufacturers have been advised to give a 5 per cent discount on purchase of a new vehicle and a waiver on the registration fee to individuals who produce a scrapping certificate.