Union Minister for Road Transport & Highways Nitin Gadkari has made a strong case for the implementation of the Vehicle Scrapping Policy, highlighting its potential to bring significant economic and environmental benefits. Speaking at the ACMA Annual Session 2025, Gadkari revealed that phasing out 97 lakh old, unsafe, and polluting vehicles in India could generate as much as ₹40,000 crore in GST revenue for both the Centre and the states.
According to him, this large-scale scrappage program would not only contribute to government finances but also act as a growth engine for the Indian automobile sector. With rising demand for cleaner, fuel-efficient vehicles, the scrapping of old models will open the door for millions of new purchases, boosting manufacturing and allied industries. Importantly, the policy has the potential to create 70 lakh new jobs, ranging from recycling plants and auto component manufacturing to logistics and supply chain services.
So far, India has managed to scrap nearly 3 lakh vehicles, out of which 1.41 lakh were government-owned, but this represents only a fraction of the total target. To build the necessary infrastructure, the private sector has already invested around ₹2,700 crore in setting up scrapping and recycling units. Gadkari stressed that this number must rise sharply if India is to realize the full benefits of the policy.
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Economic and Environmental Impact of Vehicle Scrapping
One of the biggest advantages of the scrappage policy is the boost to GST collections. When old vehicles are scrapped, buyers often replace them with new models, which directly increases demand for cars, two-wheelers, and commercial vehicles. This leads to higher sales volumes for manufacturers and, in turn, a higher Goods and Services Tax (GST) inflow for the government. Gadkari estimates this additional revenue could cross ₹40,000 crore, making the initiative a win-win for both industry and the state.
Another crucial benefit is reduction in manufacturing costs. Recycling scrap metal such as steel, aluminum, and copper from end-of-life vehicles could reduce the cost of auto components by up to 25%. This will make Indian automobile parts more competitive in the global market and reduce reliance on costly imports of raw materials.
On the environmental side, removing older, high-emission vehicles from Indian roads will significantly cut pollution levels. With better fuel efficiency and stricter emission norms in new vehicles, the scrappage program could help India meet its climate targets while improving urban air quality. Gadkari also emphasized the importance of reducing fuel imports and promoting energy security by aligning the scrappage initiative with India’s push for ethanol-blended fuels (E20 and beyond).
Government Push and Industry Support Needed
To encourage adoption, Nitin Gadkari has requested that automakers provide a minimum 5% discount on new vehicles purchased with a valid scrappage certificate. This financial benefit would motivate consumers to give up their old vehicles sooner. Additionally, he has written to the Prime Minister and Finance Minister recommending GST relief on the purchase of new vehicles under the scrappage program. If implemented, this could provide a double incentive for vehicle owners, making the program more attractive.
Despite these opportunities, challenges remain. Out of the 97 lakh targeted vehicles, only a small portion has been scrapped so far, showing that the policy’s execution is still in its early stages. Building awareness among consumers, strengthening the fitness test system, and expanding recycling infrastructure are critical for success. Many vehicle owners are reluctant to part with old vehicles unless there are clear financial benefits, which means strong incentives and enforcement will be key.
For the auto industry, the policy represents a major growth opportunity. With millions of new vehicles expected to replace scrapped ones, companies could see demand surge in the coming years. At the same time, the recycled material from scrapping will bring down production costs, creating a sustainable cycle that benefits manufacturers, consumers, and the environment alike.
The Vehicle Scrapping Policy is one of India’s most ambitious mobility reforms, aiming to tackle pollution, reduce road safety risks, and strengthen the auto sector. By scrapping 97 lakh unfit vehicles, the government expects to add ₹40,000 crore in GST revenue, create 70 lakh jobs, and reduce dependency on imports through recycled raw materials. While progress so far has been slow, the long-term gains make this initiative a potential game-changer for the economy and the environment.
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