NEW DELHI: Prime Minister Narendra Modi today launched the much-awaited vehicle scrappage policy with an aim to phase out old and unfit vehicles in an environment-friendly manner.

Talking on the policy while virtually addressing the Gujarat Investor Summit, Modi said that vehicle scrapping will help phase out unfit and polluting vehicles in an environment-friendly manner and will give a new identity to the auto sector while promoting a circular economy.

"Our aim is to create a viable circular economy and bring value for all stakeholders while being environmentally responsible," he said.

The policy which has been in discussion for quite some time aims to scrap old, unfit and polluting vehicles by creating a facility for automated testing of vehicles that has passed their registration period. So essentially the scrappage policy will come into effect immediately after the registration period of a vehicle is over.

It would then have to undergo a mandatory fitness test. According to the motor vehicle laws in the country, a passenger vehicle has a life of 15 years and commercial vehicles have a lifespan of a decade. Vehicles plying on the roads beyond these durations are considered to pollute the environment at a greater pace compared to newer cars.

Owners who scrap their old vehicle and plan to buy a new one will get incentives as a part of the policy. A value of the ex-showroom price of the old vehicle, ranging from 4 per cent to 6 per cent, will be given to the owner when they choose to scrap the vehicle.

A rebate of up to 25 per cent of Road Tax will also be given to a person when he buys a new personal vehicle after scrapping an old one. The rebate will be up to 15 per cent for commercial vehicles. In addition, vehicle manufacturers have been advised to give a 5 per cent discount on the purchase of a new vehicle and a waiver on the registration fee to individuals who produce a scrapping certificate.