Auto scrap births arbitrage market

Scrapping your old smoke-belching car was supposed to help clean the air and encourage a new purchase through discounts.

- Nehal Chaliawala

In a curious twist, the scrapping policy now ends up providing a hefty discount to another buyer of a different vehicle—potentially worth lakhs of rupees for luxury car buyers. It also gives you, the seller, more money than just the scrap value of the old car.

Here's an example of how this works. You scrap your 15-year-old car, which is at the end of its operational life, at an authorized scrapping yard, also called registered vehicle scrapping facilities (RVSF).

You get two things—a certificate of deposit and, say, about ₹20,000 for the value of the car.

Then, you sell this certificate at a government-backed online platform—DigiELV.com—to the highest bidder, which could be a new car buyer or even a dealer. A certificate typically trades for around 20,000-35,000, as per industry estimates. So, you end up making about 50,000 for your old car.

Next, the person who buys the certificate from you buys a new car-say, a luxury car costing 1 crore in Rajasthan, where the scrapping certificate attracts a 25% rebate on road tax. The road tax, which is 10% in the state, is thus reduced by 2.5 lakh, effectively becoming a discount for the buyer who bought your certificate for just 30,000. If the buyer is a car dealer, he offers to sell this certificate further to potential customers at his dealership to woo them with this added benefit.