A voluntary vehicle scrappage policy was introduced by Finance minister Nirmala Sitharaman on Monday, while presenting the Union Budget 2021, in a bid to encourage fuel efficient and environment-friendly vehicles.

“We are separately announcing a voluntary vehicle scrapping policy, to phase out old and unfit vehicles. This will help in encouraging fuel efficient, environment friendly vehicles, thereby reducing vehicular pollution and oil import bill. Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles. Details of the scheme will be separately shared by the Ministry,” said Sitharaman.

The vehicle scrappage policy has been under consideration for a couple of years by now.

“This is likely to increase demand for new commercial vehicles (CV) and Passenger vehicles (PV). Scrappage policy, though voluntary, will likely become mandatory as fitness certificates will be made mandatory. It's a soft step towards coming up with mandatory. In the dearth of a proper infrastructure, just introduction of a fitness certificate may not be enough. The government will also need to build the necessary infrastructure to get this to action on ground,” said Rajeev Singh, Partner, Automotive Leader, Deloitte India.

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