RTO Rules for Car Scrapping in India

What are the RTO Rules for the Car Scrapping Process and Deregistration of Old Vehicles?

1. RTO rules for the car scrapping process: 

1. The vehicle owner must write a letter to the concerned RTO to inform them about scrapping the car. 
2. An affidavit must be submitted stating that the vehicle is not under any bank loan, insurance claims, pending traffic challans, court cases, or thefts. 
3. The original documents of the vehicle must be surrendered, and the VIN plate must be cut out after scrapping the car. 
4. The RTO requires a confirmation document on letterhead with the complete address of the scrap yard or facility, along with pictures of the scrapped vehicle. 

2. RTO rules for deregistration of old vehicles: 

1. The vehicle owner must inform the respective RTO about scrapping the old vehicle. 
2. The Registration Certificate, along with the chassis number plate removed at the time of scrapping, must be surrendered. 
3. An affidavit must be submitted with the application for deregistration of the vehicle, stating that the vehicle is not under any pending court cases, loans, or insurance claims. 
4. The RTO will verify the documents and procure diligence reports from the National Crime Records Bureau and the traffic police. 
5. The vehicle records maintained by the RTO database regarding the sale of the vehicle will also be verified. 

1. The RTO will only proceed with the deregistration of the old vehicle if they find the documents to be satisfactory. 

Why the RTO Introduced the Vehicle Scrappage Policy in India

The Vehicle Scrappage Policy 2021 aims to identify old, unfit, and polluting vehicles and eliminate them. Below are some of the essential aspects of the policy: 

1. Decrease pollution by scrapping vehicles without proper fitness and registration. 
2. Enhance passenger, road, and vehicular safety. 

1. Create employment opportunities in the automotive industry. 
2. Establish a formalized vehicle scrappage industry, currently operating informally. 
3. Lower fuel consumption and maintenance expenses for vehicle owners. 
4. Boost the availability of inexpensive raw materials for the automotive, steel, and electronics industries. 

RTO Documents Required for Car Scrapping in India

During the process, it is necessary to carry the original documents, they are as follows:

1. Registration Certificate(RC)
2. Aadhar Card 
3. Owner's Pan Card 
4. Address Proof 

Which Vehicles Come Under the RTO Scrapping Rules in India

In order to accommodate the diverse types of vehicles on Indian roads, the Vehicle Scrappage Policy has been categorized based on the type of vehicle. They have been categorized into four types. 

• Government Vehicles: For government vehicles, the Vehicle Scrappage Policy was approved in January 2021. It applies to vehicles owned by the central government and the state government which are more than 15 years old. Such vehicles shall be scrapped as per the policy, which comes into effect on 1 April 2022. 
• Commercial Vehicles: Transport vehicles usually come under commercial vehicles; they're essentially used for business purposes. These vehicles must undergo a fitness test after 15 years. If the commercial vehicle is deemed unfit, it shall be scrapped under the commercial vehicle scrap policy rules. 
• Private Vehicles: Private vehicles are vehicles owned and used by individuals or private entities for personal requirements or transportation. The age limit for a private vehicle to undergo a fitness test is set at 15 years. 
• Vintage Vehicles: Vintage cars and bikes are typically older than the average vehicles. However, they are often well-maintained and driven less frequently. Thus, this is a separate category, and the nature of such vehicles shall be considered before any directives regarding scrapping are made. 

Vehicle Fitness Tests Required Before RTO Scrapping in India

Here are some points about the Fitness Test under the Vehicle Scrappage Policy: 

1. The Fitness Test determines if a vehicle can continue to be used beyond its technical lifespan. 
2. It involves a detailed examination to assess the vehicle's roadworthiness and environmental impact. 

1. The test covers safety examinations such as engine performance and braking. 
2. Automated Fitness Test Centers will conduct these tests under the Vehicle Scrappage Policy. 
3. The test must be repeated every five years, and a green cess of up to 25% of road tax may be charged. 
4. Vehicles that fail the Fitness Test cannot be registered under the Scrappage Policy and may not be driven on Indian roads. 
5. Owners can either scrap the vehicle or repair it to pass the test and renew registration. 

Authorised RTO Centres for Vehicle Testing and Scrapping

Here are some directions about where to get a vehicle tested or scrapped: 

1. Check the expiration date of the vehicle's Registration Certificate (RC) and visit a registered automated vehicle inspection centre if you want to keep the car. 
2. If you want to dispose of the vehicle, wait for a registered scrapping centre to be established. 
3. For the implementation of the initial phase of the Vehicle Scrapping Policy, the government is setting up proper inspection centres. 

1. Scrapping facilities and inspection centres will be connected to the VAHAN database. 
2. The complete testing procedure for the policy has not been outlined yet, but it is expected to be similar to safety and emission testing in other countries. 
3. Expect the inspection to include tests for safety equipment such as airbags and seatbelts, pollution levels, headlight alignment, brakes, engine and electronic components, and structural damage and rust. 

RTO Fees for Vehicle Scrapping in India

Renewing an old vehicle and undergoing the mandatory fitness test can be relatively expensive. One possible solution is to consider scrapping the old vehicle. Moreover, it is likely that fees may increase in the future and may be subject to periodic inflation. To illustrate, below are the expenses that may be incurred for a private vehicle that is older than 15 years: 

1. Registration renewal fee 
2. Fitness test fee 

1. Road tax 
2. Green cess. 

Key Benefits of RTO’s Car Scrapping Rules in India

The Indian automotive industry has been struggling since the second half of 2019, and the COVID-19 pandemic has worsened the situation. Despite a modest improvement in post-Diwali sales in 2020, the industry remains concerned. However, the Vehicle Scrappage Policy is expected to assist the struggling industry in India by eliminating older vehicles and generating demand for newer ones. Additionally, scrapping old and unfit vehicles will benefit the environment. 

The key highlights of the Vehicle Scrappage Policy announcement include the following: 

1. The establishment of a system for scrapping unfit vehicles. 
2. The creation of regulations for the scrapping process. 
3. Benefits for vehicle owners who participate. 

The policy is expected to have a significant impact on reducing air pollution, though the degree may vary by location. Ultimately, the policy is likely to encourage the purchase of more eco-friendly, safe, and technologically advanced vehicles. 

Effect of Scrapping on Car Insurance Policy

The 2021 vehicle scrappage policy mandates the deregistration of private cars over 20 years old and commercial vehicles over 15 years old. Vehicles that pass the fitness test can be re-registered, while those that fail must be scrapped. Car manufacturers can obtain industrial materials such as steel, aluminium, rubber, plastic, and copper from scrapped unfit vehicles. With access to low-cost materials for manufacturing, the cost of vehicle production may decrease, which can lead to reduced car prices. Consequently, car insurance costs may also decrease since the Insured Declared Value (IDV), which plays a vital role in determining car insurance prices, is determined by the market value of the car. 

Unfit vehicles are major contributors to third-party claims, and there are regulations on third-party car insurance premiums. However, with the scrappage policy, it is expected that third-party claims will decrease since unfit vehicles will be scrapped. Scrapping unfit and older cars can also reduce the Incurred Claim Ratio (ICR) of insurance companies. The ICR is the ratio of the total value of settled claims to the total value of premiums received in a financial year.  

1. If you plan to scrap your car, the first step is to cancel the registration certificate (RC) of the car at the Regional Transport Office (RTO). Once the RC is cancelled, you can inform the insurer about the cancellation of the car insurance policy. 
2. If there is a refund due on the policy, it will be calculated on a pro-rata basis. However, if a claim has been raised during the current policy year, the car insurance policy cannot be cancelled. Not cancelling the registration certificate of the car after scrapping it could lead to several consequences. 

1. Criminals might use the scrapped car document for car theft if the RC is not cancelled. Fraudulent people can misuse the documents of the car for illegal activities, even after it has been scrapped. Therefore, it is essential to cancel the RC of the car once it has been scrapped. 
2. If you have scrapped your car, refunds on the car insurance policy will be given on a pro-rata basis only after the RC is cancelled. However, if a claim has been raised during the current policy year, no refund will be provided. 
3. Ensure that the car insurance policy is cancelled after the registration of the vehicle is cancelled, irrespective of whether a claim has been made or not. 

How Old Car Value is Decided Before RTO Scrapping

1. If the car is not in working condition you are likely to get the rate per kilogram of the metal parts. The current rate is an average of Rs.15 per kg for metal parts.
2. If the car is in good working condition, the scrap dealer will sell the spare parts of the vehicle. Only the metallic body of the car will be scrapped. The scrap dealer is likely to get a good profit on the sale of the spare parts, so the car owner can request a higher lump sum amount at the time of scrapping.

The ministry claims that this policy will be able to reduce emissions from vehicles by up to 25% and save a lot of fuel each year.

GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017