Old vehicles are not only inefficient. They are also unsafe and highly polluting. Vehicles manufactured before BS VI norms can emit up to eight times more pollution compared to newer vehicles. At the same time, end of life vehicles contain valuable materials. It is estimated that nearly 98 million tonnes of steel can be recovered from vehicles manufactured between 2005 and 2023. This recovery could save around 43 million metric tonnes of CO2 equivalent emissions.
The issue is not small. It is national in scale.
NITI Aayog Identified the Core Gaps in the System
The vehicle scrappage policy did not emerge in isolation. NITI Aayog identified key gaps slowing down India’s transition to a formal scrappage system. The report pointed to four main challenges:
- Limited rollout of Automated Testing Stations and Registered Vehicle Scrapping Facilities
- Weak financial viability of formal scrapping centres
- Procedural bottlenecks in deregistration and scrapping
- Low consumer awareness
At the same time, informal scrappers were offering higher immediate payments. In many cases, vehicle owners were receiving ₹15,000 to ₹20,000 more from informal channels compared to formal scrapping facilities. This created a strong price gap.
The report made it clear that enforcement alone would not solve the problem. Incentives and digital tools were necessary.
Government Incentives Are Designed to Make Scrapping Attractive
India’s vehicle scrappage policy provides a mix of national and state-level incentives, but the exact financial benefit depends on where the new vehicle is registered.
The Central Government recommends road tax rebates of up to 25 percent for personal vehicles and 15 percent for commercial vehicles, and several states such as Karnataka, Punjab, Madhya Pradesh, Odisha, Bihar, Rajasthan, and Haryana broadly follow these levels.
However, some states apply lower or different structures. For example, Uttar Pradesh offers 15 percent for personal vehicles and 10 percent for commercial vehicles, while Maharashtra has implemented a flat 10 percent rebate across categories. This makes the total savings variable rather than uniform across India.
To target the most polluting vehicles, a newer provision allows up to 50 percent road tax concession for BS-I and pre-2002 vehicles in states that have adopted the enhanced benefit, with Madhya Pradesh among the early adopters.
In addition to road tax rebates, vehicle owners receive:
- Scrap value of roughly 4 to 6 percent of the new vehicle’s ex-showroom price
- 100 percent waiver of registration fees for the replacement vehicle (national benefit)
- OEM discount typically equal to 1.5 percent of the ex-showroom price or up to ₹20,000 for passenger vehicles, with higher percentages for commercial vehicles
Because these components are cumulative, the total consumer benefit can be materially higher in states offering the full rebate and for older, more polluting vehicles.
Digital Marketplaces Help Close the Timing and Price Gap
One of the main challenges identified under the Voluntary Vehicle Fleet Modernisation Programme and India’s Vehicle Scrappage Policy was the lack of liquidity for Certificates of Deposit and limited price transparency. Vehicle owners often faced a gap between scrapping their old vehicle and purchasing a new one.
MMCM’s DigiELV functions as a Ministry of Road Transport and Highways authorized online marketplace for trading Certificates of Deposit. It is integrated with the VAHAN platform. The system verifies transactions and issues transfer certificates instantly to buyers.
The platform operates on a bid-based model. Participants can negotiate and trade certificates across vehicle categories. This allows the market to determine prices instead of relying on fixed or unclear valuations.
Policy data shows 71,196 Certificate of Deposit trades with an average trade price of ₹10,634 across categories. This indicates real usage and active participation.
Trading of Certificates of Deposit through the platform reduces the time gap between scrapping a vehicle and purchasing a new one. It allows vehicle owners to realise value even if they do not immediately buy another vehicle.
This trading mechanism by MMCM majorly incentivises formal scrapping channels and strengthens the objectives of India’s Vehicle Scrappage Policy.
Expanding Into EPR and SDG Credit Markets
The vehicle scrappage policy also links to Extended Producer Responsibility targets under the Environment Protection Rules 2025.
EPR targets are set at:
- 8 percent from 2025 to 2030
- 13 percent from 2030 to 2035
- 18 percent from 2035 onwards
Digital marketplaces now support EPR certificate trading, allowing manufacturers to assess obligations and buy or sell credits accordingly.
In addition, SDG credits can be retired to meet voluntary sustainability goals and disclosure requirements.
This integration connects vehicle scrappage with compliance and sustainability reporting requirements.
Measurable Environmental and Economic Impact
The environmental gains from formal scrappage are not theoretical.
India could recover 98 million tonnes of steel and avoid 43 million metric tonnes of CO2 equivalent emissions through proper recycling of vehicles manufactured between 2005 and 2023.
On the ground, DigiELV reports:
- 80,815 tons of CO2 emissions reduced
- ₹292.26 crore saved by vehicle buyers
- 117,656 new vehicle buyers benefitted
These figures indicate real economic and environmental outcomes tied to policy implementation.
A National Shift in Motion
India’s vehicle scrappage policy reflects a shift in how mobility, environment, and economic value are managed. NITI Aayog outlined the vision for a cleaner and more formal vehicle recycling ecosystem. Government incentives addressed financial concerns. Digital platforms enabled execution.
The combined effect is visible in rising Certificate of Deposit trades, increased formal scrapping, measurable CO2 reduction, and financial savings for citizens. The transition is ongoing. But the policy intent, incentive design, and digital execution now move in the same direction.
India’s vehicle scrappage system is no longer only a regulatory requirement. It is becoming an operational marketplace linked to environmental and economic value.
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