Vehicle Scrappage Scheme Gains Traction

The benefits have largely been driven by motor vehicle tax concessions offered by states and Union Territories against certificates of deposit issued after scrapping old vehicles. A total of 27 states and Union Territories have announced tax rebates of up to 25 per cent on non-transport vehicles and up to 15 per cent on transport vehicles under the scheme.

The development comes as the automobile industry seeks stronger government incentives, arguing that the current framework is insufficient to generate significant scrappage-led replacement demand. The ministry said 22 automobile manufacturers are also offering discounts of 1.5–3 per cent on ex-showroom prices against scrappage certificates, with around 30,000 vehicles having benefited so far.

Official data shows that nearly 0.36 million vehicles have been scrapped at registered vehicle scrapping facilities across India. Of these, about 0.16 million were government-owned vehicles over 15 years old, indicating early compliance by public-sector fleets.

To accelerate adoption, the Centre has extended the Department of Expenditure’s Scheme for Special Assistance to States for Capital Investment across multiple financial years. The scheme earmarked incentives of Rs 20 billion in FY23, Rs 30 billion each in FY24 and FY25, and Rs 20 billion in FY26, linked to milestones in vehicle scrappage and the rollout of automated vehicle testing infrastructure. Between FY23 and FY25, Rs 25.7 billion has been recommended for disbursement to states under the scheme.

The government also highlighted capacity creation across the country. So far, 180 registered vehicle scrapping facilities have been approved across 23 states and Union Territories, of which 123 are operational. In parallel, 407 automated testing stations have been sanctioned across 24 states and Union Territories, with 160 currently operational, enabling fitness testing of ageing vehicles.

Under the voluntary scrappage policy, private vehicles must undergo automated fitness testing after 20 years, while commercial vehicles are required to be tested after 15 years. Vehicles declared unfit are encouraged to be scrapped through authorised facilities.

The ministry reiterated that the policy aims to phase out old and polluting vehicles, reduce vehicular emissions and fuel imports, and modernise India’s vehicle fleet through market-led replacement.