Own a 15-year old vehicle? Here's how the new scrappage policy may affect you

While perhaps not on top of the auto industry's policy change wishlist, the announcement of a new voluntary scrappage policy for vehicles was seen as a welcome move by members across the board.

Details regarding the new scrappage policy for 15-and 20-year-old vehicles could be out by February 15, which is when the Budget Session of Parliament culminates.

Union Budget 2021 | FM Nirmala Sitharaman announces voluntary scrapping policy to phase out old vehicles

A lot has been made of the policy's resultant boost on the automobile sector and other policies that aim to incentivise public transport, but what does it mean for private car owners?

The new policy — yet to come into effect — will require cars that are 15 or 20 years old to undergo a fitness test at an automated centre that will assess whether the car is still good to run on the road or whether it is headed to the scrapyard. Fitness tests have so far been conducted by humans.

The problem that most private vehicle owners are likely to face is the cost of getting an automated test, which moneycontrol says is a whopping Rs 40,000. On top of that is a "green tax" which will be levied annually on vehicles older than 15 years. An India Today report states that the green tax may differ across the country depending on pollution levels.

Union Budget 2021 | Scrappage policy will help in generating demand for new vehicles

All the additional costs appear to make owning 15 to 20-year-old vehicles a financial burden for private vehicle owners. Automakers will hope that these costs will lead vehicle owners to increase their frequency of buying an automobile, thereby driving up manufacturers' sales.

Union Transport Minister Nitin Gadkari said Monday that the scrappage policy may cover over 1 crore vehicles.

"The policy would cover an estimated 51 lakh Light Motor Vehicles (LMVs) that are above 20 years of age, while another 34 lakh LMVs are above 15 years. It would also cover 17 lakh medium and heavy motor vehicles, which are above 15 years, and currently without valid fitness certificates," he said.

(With agency inputs)