India Scrapped Just 1.82 Lakh Cars: What Went Wrong with the Scrappage Policy

What the Policy Was Supposed to Do

India's Vehicle Scrappage Policy, notified by the Ministry of Road Transport and Highways (MoRTH) in March 2021 and operationalised in phases from April 2022, had three stated objectives. First, remove older, more polluting vehicles from the road to improve air quality in cities. Second, reduce the economic burden of maintaining ageing vehicles while incentivising new vehicle purchases. Third, create a formalised scrap metal supply chain that would reduce India's dependence on imported steel.

The policy framework is straightforward. Private passenger vehicles completing 20 years from their date of registration must undergo a mandatory fitness test at a government-designated Automated Testing Station (ATS). Commercial vehicles face a stricter 15-year rule. If a vehicle fails the ATS fitness test, its registration cannot be renewed — effectively grounding it. Owners who voluntarily scrap their vehicle at a Registered Vehicle Scrapping Facility (RVSF) before the deadline receive a scrappage certificate that unlocks a cascade of financial benefits.

In theory, the mechanics were sound. Remove the stick (registration cancellation), add the carrot (rebates and discounts), and a large fraction of India's ageing fleet would move into the formal scrap channel. In practice, the system has been hamstrung by execution failures at every layer.

Three Reasons the Scheme Fell Short

The 64 percent shortfall against target is not due to one single failure. It is the product of three compounding structural problems that each independently would have damaged the programme, and together have crippled it.

ATS Fitness Test: Process, Cost, and What Happens if You Fail

For owners of cars registered before 2006, understanding how the Automated Testing Station process works is now essential. The ATS is a fully computerised testing lane — unlike the old manual fitness checks at RTOs, where a pass or fail was subject to human discretion and was frequently compromised, the ATS uses calibrated equipment that produces a computerised result. There is no scope for informal influence at a properly functioning ATS.

The test fee currently ranges from Rs. 500 to Rs. 800 per vehicle, varying by state. The entire process at a properly equipped ATS takes approximately 30 to 45 minutes. You can book an appointment online via the Parivahan portal in states where the integration is live, or walk in at most centres.

Scrappage Benefits: What You Actually Get

The financial benefits of voluntary scrappage are real, but they are structured to benefit new-vehicle buyers. Here is a full breakdown of what owners receive when they scrap a vehicle at a Registered Vehicle Scrapping Facility and use the scrappage certificate for a new purchase.

A typical owner scrapping a 2003 Maruti 800 and buying a new Swift could realistically assemble: scrap metal value (approx. Rs. 18,000) + 25% road tax rebate (approx. Rs. 7,000 on a Rs. 7 Lakh Swift) + registration fee waiver (approx. Rs. 8,000) + Maruti OEM discount (Rs. 25,000) = approximately Rs. 58,000 in total benefit. That is meaningful but not transformative for a household that was not already planning a new car purchase.

Green Cess: The Hidden Tax on Older Cars

While the scrappage incentives have been widely discussed, the green cess on older vehicles has received far less attention — and it is quietly raising the cost of owning an ageing car in several states. The green cess is an additional road tax levied on vehicles beyond a certain age, designed to nudge owners toward renewal or scrappage.

Delhi has the most aggressive green cess regime in the country. A diesel vehicle over 15 years old in Delhi faces a 15% additional road tax levy at each renewal, on top of the base road tax. The intent is to make continued ownership of older diesels economically unattractive in high-pollution metros. The policy has had some measurable effect in Delhi, which has seen the highest voluntary scrappage rates of any state, but the effect is concentrated in urban areas with functioning ATS centres.

What This Means for Used Car Buyers and Sellers

The scrappage policy was designed to shrink the pool of very old vehicles in circulation. With the scheme underperforming by 64 percent, the actual impact on used car supply has been negligible. For buyers and sellers in the used car market, this has specific implications that are already playing out in pricing data.

The glut of pre-2005 hatchbacks — Maruti 800, Alto (old body), Santro, WagonR (Phase 1), Zen, Indica, Palio — was supposed to thin out as owners were compelled to scrap or at least cease operating these vehicles. Instead, many of these cars continue to trade in the informal used car market at prices of Rs. 50,000 to Rs. 1.5 Lakh. This supply overhang is suppressing entry-level used car prices and making it harder for sellers of slightly newer 2008–2012 hatchbacks to justify asking prices above Rs. 2 Lakh.

For those buying a used car in the sub-Rs. 2 Lakh bracket, the immediate practical takeaway is to check the vehicle's fitness certificate status. A car that is technically overdue for its 20-year ATS test may not be legally registerable at renewal — and you as the buyer inherit that liability. Check the vehicle's registration expiry date and cross-reference with its year of manufacture before making any payment.

The used car segment that is most directly impacted by the scrappage policy shortfall is the sub-Rs. 2 Lakh hatchback category. If the scrappage programme accelerates — which MoRTH has indicated may happen as more ATS centres come online in 2026 and 2027 — a rapid removal of old vehicle supply could cause a price correction upward in this segment. Buyers who have been considering very old hatchbacks may want to move sooner rather than later, while sellers of clean 2009–2014 hatchbacks could see better prices as sub-2-Lakh supply contracts.

For a deeper analysis of how the scrappage rules interact with the used car market pricing, see our coverage of Scrappage 2026 and Used Car Market Impact and the NITI Aayog ELV Report guide for used car owners.

What Needs to Change for the Policy to Work

MoRTH has acknowledged the implementation gap and has announced a revised target of commissioning 300 additional ATS centres by the end of FY2027. If this timeline is met, the infrastructure constraint — currently the single largest bottleneck — would largely be resolved. But infrastructure alone will not close the incentive gap for owners who genuinely cannot afford to replace their vehicle.

Several industry bodies and consumer groups have recommended a direct cash-for-scrap component — a flat Rs. 25,000 to Rs. 50,000 government payment to any owner who scraps a qualifying vehicle, regardless of whether they plan to buy a new vehicle. This would mirror models that have worked in South Korea, France, and the United States, where scrappage schemes have achieved 80 to 90 percent of their stated targets. Whether the Indian government will adopt this approach remains to be seen; it would require significant central budget allocation but could unlock rapid clearance of the backlog.

Enforcement for private cars also needs a rethink. Rather than relying on registration renewal as the sole trigger, a proactive campaign in the five highest-density states — combined with RTO outreach and conditional renewal notices — could move a large number of borderline owners toward ATS compliance without requiring active roadside enforcement.

For a comprehensive view of the broader policy trajectory, including the NITI Aayog's End-of-Life Vehicle framework, see our full explainer on the 20-year rule and what it means for Indian car owners.