Scrapping 97 Lakh Vehicles Will Give Govt Rs 40,000 Crore GST: Nitin Gadkari

Union Road Transport and Highways Minister Nitin Gadkari has urged the automobile industry to accelerate adoption of the vehicle scrappage policy, arguing that systematic replacement of old and polluting vehicles could unlock Rs 40,000 crore in GST revenue and create 70 lakh jobs. Speaking at the ACMA Annual Session 2025, Gadkari framed the initiative as both an economic and environmental opportunity.

Targets vs Current Progress

The scale of the task is vast. As of August 2025, just 3 lakh vehicles have been scrapped under the Voluntary Vehicle Fleet Modernisation Programme, of which 1.41 lakh were government-owned. With only about 16,830 vehicles scrapped each month, the pace falls well short of the target of 97 lakh.

Industry insiders note that without stronger incentives and enforcement, scaling up from thousands to millions of scrapped vehicles will be difficult. Many private vehicle owners remain reluctant to part with older vehicles, often due to sentimental value, lack of awareness, or inadequate financial incentives.

Economic and Industrial Case

Gadkari highlighted the revenue potential, noting that the Rs 40,000 crore GST windfall would be shared between the centre and states. He added that greater use of recycled materials could cut component costs by up to 25 percent.

India currently imports around 60 lakh tonnes of steel scrap annually, along with aluminium, platinum, and palladium. A robust scrapping programme could reduce this reliance on imports while ensuring local supply of recycled raw materials for auto and component manufacturing.

Yet the minister acknowledged that adoption has been slow, despite Rs 2,700 crore in private sector investment in scrappage centres. The auto industry has not fully embraced the model, partly due to concerns over infrastructure capacity and whether demand for new vehicles will rise as expected.

Incentives and Consumer Response

To stimulate demand, Gadkari has called on manufacturers to offer a minimum 5 percent discount to buyers who present scrappage certificates. He stressed that this should be seen not as charity but as a way of driving replacement purchases and keeping sales momentum.

While such discounts could help, consumer confidence in the scrapping process remains patchy. Issues such as transparency in certificate issuance, delays at scrapping centres, and uncertainty over resale value of scrap metal have limited participation. Without addressing these operational concerns, even additional discounts may not significantly accelerate uptake.

Employment and Environmental Gains

The government projects 70 lakh jobs could be generated across vehicle collection, dismantling, recycling, and manufacturing. The spread of roles from low-skilled labour to technical processing would create opportunities across states. However, most of these jobs depend on large-scale adoption, which is far from guaranteed.

The environmental case is clear. The targeted vehicles include some of the most polluting on Indian roads, often failing to meet emission standards and consuming more fuel than modern replacements. Removing them would improve urban air quality and reduce carbon emissions. Critics point out, however, that unless scrappage is coupled with stronger public transport investment, the environmental benefits may be offset by growth in private vehicle use.

Policy Framework and Challenges

The Motor Vehicle Rules already mandate fitness tests for commercial vehicles every two years until eight years old and annually thereafter. Private vehicles are tested after 15 years and every five years after that, while government vehicles automatically expire at 15 years. These rules provide a framework, but enforcement varies widely across states.

Regional implementation poses further challenges. States with larger vehicle populations could see bigger GST benefits, but effective coordination between central policies and state-level agencies will be essential. Uneven enforcement could create loopholes where older vehicles continue to operate unchecked.