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India’s proposed vehicle-scrapping policy may not be the right pill for its auto industry

Organising the vehicle scrapping industry.
By Sangeeta Tanwar
Published Last updated This article is more than 2 years old.

The Narendra Modi government has embarked on a two-pronged approach to revive India’s embattled auto sector—formalise scrapyards and phase out older vehicles. The move, it is claimed, will curb pollution, and also indirectly boost sales.

On Oct. 14, the ministry of roads, transport and highways (pdf) proposed new guidelines for vehicle scrapping that will “protect the environment and promote a legally-compliant vehicle dismantling industry.” It has sought feedback on the guidelines by Nov. 15.

The suggestions complement another draft law, issued last month, to coerce owners to retire vehicles older than 15 years.

Whether these measures will achieve their aims is something to be looked at in detail.

The draft rules

Vehicle scrappage in India is almost entirely an unorganised industry. The only government-authorised scrapping centre in the country is the Mahindra Accelo facility in Noida, jointly run by auto major Mahindra & Mahindra and the Metal Scrap Trade Corporation (MSTC).

Automobiles sent to unregulated scrapyards contain hazardous materials such as heavy metals, plastic, waste oil, lubricants, and lead-acid batteries. In the absence of proper safeguards, their dismantling releases toxic gases, oil fumes, and dust into the environment.

The Modi government’s draft guidelines on vehicle scrappage aim to change this.

Entities dealing with scrap vehicles will now have to meet the technical requirements (pdf) prescribed by the central pollution control board (CPCB). The new scrapping facilities should, among other things, install certified equipment to detect polluting and radioactive emissions, and ensure environmentally-complaint parking of discarded vehicles. They must also be set up in a large area with adequate space for vehicular movement, the guidelines suggest.

The draft law on retiring obsolete vehicles, meanwhile, makes it difficult for owners to retain old vehicles. Vehicles older than 15 years must now undergo mandatory fitness renewal certificates every six months. Their re-registration fees will also be hiked.

“India is home to 22 of the world’s 30 cities with the highest levels of air pollution,” said Akhil Aryan, co-founder of ION Energy, a Mumbai-based vehicle battery management and intelligence platform. “It is only imperative that vehicles that are obsolete, or in a bad condition, be taken off the road.”

India’s beleaguered auto industry is also hopeful about this move.

“The vehicle scrappage initiative of the government will increase the demand for new vehicles that have better emission technology, and meet superior safety standards,” said Rajan Wadhera, president of the auto industry body Society of Indian Automobile Manufacturers (SIAM) in a press statement on Oct. 17.

Not everyone is optimistic, though.

Hit or miss?

“Retiring old vehicles can have only a small impact on air pollution. It’s the extensive use of vehicles that is contributing to increasingly poor air quality,” said Rohit Bansal, founder of Purelogic Labs India, a New Delhi-based air-quality monitoring firm.

On the other hand, implementing the new guidelines could be challenging.

For instance, old vehicles can still be plied in areas where monitoring is less stringent. “Locating and tracking vehicles older than 15 years could prove to be a huge task,” said Sunil Gupta, managing director at Avis India, a Gurugram-based car-rental company.

There is also the risk of discarded vehicles being given a makeover, with a new engine, chassis, or forged registration, and introduced on the road again. “For the policy to be effective, it has to be ensured that all parts of the dismantled vehicles are recycled,” said Bansal.

The new norms for scrapyards, too, are hard to implement. “There might be some opposition from existing, unorganised scrappage players when it comes to upgrading their processes and facilities,” Gupta said.

There are also difficulties in finding large open land parcels necessary for compliant scrapyards.

Thus, “the vehicle scrappage policy would improve demand for used commercial vehicles (CVs) but not contribute meaningfully to revive demand for new CVs in the short-term,” said the Mumbai-based India Ratings and Research in a note published on Oct. 15. The owner of a 20-year-old truck, for instance, is more likely to replace it with a 10-year-old one rather than a brand new vehicle.

A more nuanced approach, involving tweaks to the current guidelines, is needed to make the policy more effective.

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