Scrappage Policy: How you can switch to new vehicles and save

Phasing out old vehicles and buying new ones may help consumers save substantial amount of money.

A combination of fuel savings due to fuel-efficient newer vehicles, lower maintenance charges, scrap value of an old car, possibly lower road tax (due to the proposed Green Tax, which is higher on older vehicles) and some fiscal incentives will help consumers, according to Road Ministry estimates.

For instance, ₹1.14 lakh can be saved over five years by purchasing a new Swift Dzire that is being driven for personal use and scrapping an old one. Also, ₹8.32 lakh can be saved over three years if a commercial user were to buy a new truck, according to the Ministry.

“These estimates are based on examples and can vary based on vehicle usage, maintenance, and incentives that are under works,” Giridhar Aramane, Road Secretary, told BusinessLine .

Personal vehicle

Explaining how the Road Ministry arrived at those estimates, Aramane said, “By buying a new Swift D’zire — which costs about ₹8 lakh — and scrapping an old car, a personal car owner can save ₹1.14 lakh in five years. Almost 38 per cent of the saving will be from fuel efficiency, about 10-20 per cent due to maintenance, and road tax, among others.”

Also read: Scrappage policy to drive growth of used cars in the medium term

“Similarly, buying a new truck at a cost of ₹20 lakh, by scrapping an older truck, the owner can save almost ₹8.32 lakh over three years. Of this, 60 per cent savings are due to fuel, followed by maintenance cost, value- added scrap, road tax, among others,” said Aramane. The numbers have been calculated with the help of the International Centre for Automotive Technology, among others.

He said newer vehicles are sold with additional safety features for the vehicle users and those outside of vehicle, which are intangibles. “We have not put a value to the potential of lives being saved,” he said.

The voluntary scrappage policy, which is being worked out, mandates automatic fitness test for vehicles older than 15 years (for commercial vehicles) and 20 years (for private use vehicles).

Fitness testing centres

The Road Ministry has sanctioned as many as 25 automated fitness testing centres that will be set up across the country. Of these, six are functional. All the testing centres will be operated through PPP. The equipment for such testing centres are being imported now, and will hopefully be made in India over the next few years.

The Road Ministry, which has proposed green tax for older vehicles, also pointed out that the tax levels for older vehicles vary across States . “Some States charge ₹200 for five years, some charge ₹1,500-2,000 a year,” he said, urging States to impose green tax on older, polluting vehicles.

Also read: Auto sector cheers scrappage policy

“Automated centres will prevent fudging and manipulation of fitness data. The centres will automatically update the numbers in the Vahan database. Old vehicles that are highly polluting will not get a fitness certificate,” he explained.

As scrapping centres are already established in the shipping sector, the Government will try to integrate automobile scrapping centres with those of the shipping sector so that economies of scale can be achieved, Aramane said.

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