FinMin sets vehicle condemnation, scrappage timeline; to benefit auto cos like Maruti Suzuki, Tata Motors

The Finance Ministry has fixed a timeline for scrapping various types of vehicles and placing fresh orders. This is a part of new guidelines to write off losses under revised Delegation of Financial Power Rules (DOFR). These rules have set the threshold for writing off losses in case of theft, fraud, etc.

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Life of Vehicles

According to DOFR 2024, the life of a motorcycle will be seven years or covering a distance of 1.20 lakh kilometers, whichever is earlier. In the case of Light Commercial Motor Vehicles (LCVs), it will be 6 ½ years or 1.5 lakh kilometers of running. Similarly, in the case of Heavy Commercial Vehicles (HCVs), the duration would be 10 years or 4 lakh kilometers of running. For all other categories, the maximum life duration is 15 years, after which they will be scrapped. Vehicles that have been condemned also need to be scrapped once they are 15 years old.

In the case of Motor Cycles, LCVs and HCVs, once they reach their expiry date, the concerned Ministry or Department can condemn them after obtaining a certificate from an Electrical or Mechanical Workshop of the National Airport Authority or workshop of a State Road Transport Corporation. “Ministries/Departments should ensure that condemned vehicles are disposed-off within three months from the date of placing of an order with the manufacturers for replacement of vehicles,” guidelines dated April 1 said.

These guidelines can benefit passenger vehicle companies such as Maruti Suzuki, Hyundai and Tata Motors, commercial vehicle companies such as Tata Motors, Ashok Leyland, and two-wheeler companies such as Hero Motors, Bajaj and Kinetic. Earlier, there used to be direct procurement. Now it is also being done through e-marketplace GEM. Government is the single largest buyer of vehicles. For example, for Maruti Suzuki, government sales are about 24 per cent, sales through CSD sales is about 3 per cent while government procurement through GEM is about 1 per cent

Loss in case of theft, fraud etc

Guidelines have also fixed the threshold for writing off losses in case of natural or man-made disasters besides irrecoverable losses of stores or of public money or loans. Here, it has been said that a Central Government department can write off up to ₹5 lakh for losses of stores due to theft, fraud or negligence. In other cases, it will be ₹50 lakh. For an Administrator of the Union Territory, it will be ₹2 lakh and ₹5 lakh respectively.

In case of loss of revenue or irrecoverable loans and advances, the Revenue Department can write off fully in case of irrecoverable revenue, while it will be ₹5 lakh in case of other cases. For other departments of the government of India and administrators, the limit would be ₹5 lakh and ₹2 lakh.

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