Budget 2023: Centre to extend Rs 2,000 cr to states for scrapping old vehicles

The Centre will extend an additional Rs 2,000 crore to states under the Special Assistance for Capital Investment scheme in order to incentivise them to scrap old vehicles as well as provide tax concessions to individuals for it.

In the Budget 2022, the union government had launched a scheme named ‘Special Assistance to States for Capital Investment’ scheme with an outlay of Rs 1.05 lakh crore. Under the scheme, financial assistance is provided to state governments in the form of 50-year interest free loan for capital projects. The additional Rs 2,000 crore is being given to states under this very scheme by the centre, to help them to scrap condemned government vehicles or those vehicles which are older than 15 years.

With this, the total outlay under the scheme stands now at Rs. 1.07 lakh crore from Rs. 1.05 lakh crore that were allocated by the government in the Budget last year. The finance ministry had sent a letter to states in December saying that a new ‘road transport’ sector has been also been identified for providing incentive tied to prescribed reforms by states under the scheme.

Reportedly, a total amount of Rs. 77,110 crore has already been approved by the government under the scheme so far, out of which Rs. 41,118 crore has been released to states.

This scheme also aims to motivate states to undertake capital expenditure and has reserved an amount of Rs 80,000 crore for it. Further, states are also encouraged to promote reforms like digitisation, urban reforms, privatisation or disinvestment, optical fibre cable projects and building rural roads.

Vehicle Scrappage Policy 2021

The policy was announced in country’s Union Budget 2021-22. It provides for fitness tests for personal vehicles after 20 years, while for commercial vehicles, test is required after the completion of 15 years. The vehicles will be scrapped if they fail the fitness test. On the other hand, the policy also provides the owners of the vehicles certain benefits for scrapping their old vehicles. Example – under the new policy, Centre has directed that states and UTs will extend up to 25% rebate on road tax for vehicles that are purchased after scrapping old vehicles.

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