The vehicle scrapping policy will offer about 5 per cent rebate to those buying new cars if they junk their old vehicles, Union Minister Nitin Gadkari said in Rajya Sabha on Thursday terming it a ''win-win'' situation.

The voluntary vehicle scrapping policy announced in the Union Budget for 2021-22 provides for fitness test after 20 years for personal vehicles while commercial vehicles would require it after the completion of 15 years.

''The 'Voluntary Vehicle-Fleet Modernisation Programme' or 'Vehicle Scrapping Policy' will offer a rebate of about 5 per cent to buyers on new car purchases in lieu of scrapping of the old. The vehicle manufacturers are advised for providing a discount of 5 per cent on purchase of new vehicle against the scrapping certificate,'' Road Transport, Highways and MSMEs Minister Gakdari said in the upper house.

This policy will result in increase of about Rs 40,000 crore in GST, he said.

''The scheme shall provide strong incentives to owners of old vehicles to scrap old and unfit vehicles through registered scrapping centres, which shall provide the owners with a scrapping certificate,'' he said.

Listing the incentives, he said scrap value for the old vehicle given by the scrapping centre will be approximately 4-6 per cent of ex-showroom price of a new vehicle.

The state governments may be advised to offer a road tax rebate of up to 25 per cent for personal vehicles and up to 15 per cent for for commercial vehicles, he said.

In addition, the registration fees may also be waived for purchase of new vehicle against the scrapping certificate.

He said the Ministry of Road Transport and Highways will promote setting up of Registered Vehicle Scrapping Facility (RVSF) across India and will encourage public and private participation for opening up of such centres.

Efforts are also being made to set up Integrated Scrapping Facilities across India, he said, adding some of the identified places include Alang in Gujarat, where it is being planned to develop a highly specialised centre for scrapping among many other potential centres, where different scrapping technologies can be synergised together.

With a simplified registration process through a single window, the scrapping facility shall have to comply with environmental and pollution norms and with all applicable acts of law, he said.

It shall be ensured that the scrapping centres have adequate parking facility, de-pollution equipments for air, water and sound pollution and adequate facilities for hazardous waste management and disposal, he said.

Similarly, the ministry shall promote setting up of automated fitness centres on a PPP model by the state government, private sector, automobile companies, he added.

The ecosystem is expected to attract additional investments of around Rs 10,000 crore and 35,000 job opportunities, he said.

The policy is touted as a major step to boost the Indian automobile sector, reeling under the adverse impact of the COVID-19 pandemic.

The minister said it would lead to a 30 per cent boost to the Indian automobile industry turnover to Rs 10 lakh crore in the years to come from the present about Rs 4.5 lakh crore.

Gadkari said: ''Automobile industry turnover which is Rs 4.5 lakh crore at present is likely to swell to Rs 10 lakh crore in years to come with India becoming an automobile hub.'' ''This policy will result in an increase in vehicle demand which in turn would boost revenue. Also, ancillary industries would come up in large numbers thriving on junk vehicles,'' the minister said.

The minister said initially about one crore polluting vehicles would go for scrapping.

Of this, an estimated 51 lakh will be light motor vehicles (LMVs) that are above 20 years of age and another 34 lakh LMVs that are above 15 years.

It would also cover 17 lakh medium and heavy motor vehicles, which are above 15 years, and currently without valid fitness certificates, he said.

It will give a boost to 'Aatmanirbhar Bharat' campaign, he added.

These vehicles are estimated to cause 10-12 times more pollution than the latest vehicles.

Presenting the budget for 2021-22 in parliament, Finance Minister Nirmala Sitharaman on February 1 had said details of the scheme will be separately shared by the ministry.