Vehicle Scrappage policy: A Master Stroke from Government!

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Vehicle Scrappage policy: A Master Stroke from Government!

The much-awaited vehicle scrappage policy is awaiting final clearance from the Union Cabinet and would focus on eliminating the fleet of old polluting commercial vehicles as well as private vehicles plying on the country's roads.

Once the policy is approved, India could emerge as a hub for automobile manufacturing as key raw material available from scrapping like steel, aluminum and plastic are bound to be recycled, bringing down automobile prices by 20-30 per cent.  A well-defined vehicle scrappage policy in India can help create an industry of its own with a business opportunity of $6 billion (Rs 43,000 crore) a year, say automobile sector executives and experts.

An HDFC Bank study has estimated the market for vehicle scrappage and recycling at $6 billion. According to it, if the policy is defined well, 9 million vehicles could go off roads by fiscal 2021 and 28 million by 2025, largely comprising two-wheelers. It would reduce carbon dioxide emission by 17% and cut particulate matter in air by 24%. The overall pollution level is likely to come down by 25%.  Also, it would save 8 million tons of oil a year. Our country would be emerging as one of the fastest going country to reduce carbon dioxide emission and will attract a huge investment from ESG funding boosting the overall economy.  The ESG funding has been growing rapidly since last few years and there has been trillions of dollars awaiting to be invested.   

However, there are certain areas where the government needs to focus on to promote scrappage.

  • offer sizeable financial incentives
  • develop a resale market for the scrappage
  • certificate for those who don’t want to replace their scrapped vehicles with new one

All in all, it would prove to be master stroke for economy from the government for the following reasons:

  • Reduce manufacturing cost for auto sector
  • Easy availability of major raw material as scrappage will be recycled
  • Reduce the pollution level of country
  • Attracting more ESG funding in the country
  • Boosting the demand for Metals and Plastics as large number of vehicles are likely to be replaced with new vehicle
  • Country would be emerging as one of the largest auto hubs boosting export to a large extent 


As such the vehicle scrappage policy will be benefiting many industries.

Sectors to be watched for investments:
    • Auto and Auto Ancillary
    • Metals
    • Plastic
    • Tyre
-Rajendra Jhanwar

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