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In order to incentivise them to scrap old vehicles and also provide tax concessions to individuals for it, the Union government will give an additional Rs 2,000 crore to states under the Special Assistance for Capital Investment scheme. The government in 2022-23 Budget had introduced the 'Special Assistance to States for Capital Investment' scheme with an outlay of Rs 1.05 lakh crore. Under the scheme, financial assistance is being provided to state governments in the form of 50-year interest free loan for capital projects.

In last month, the finance ministry, in a letter to states, had said that a new sector road transport has been identified for providing incentive tied to prescribed reforms by states under the scheme. Incentive for scrapping of old vehicles has been added to the scheme and an amount of Rs 2,000 crore has been earmarked for scrapping state government vehicles which are older than 15 years, waiver of liabilities on old vehicles and providing tax concessions to individuals for scrapping of old vehicles.

With the inclusion of road transport sector, the total outlay under the scheme has increased to Rs 1.07 lakh crore, from Rs 1.05 lakh crore announced in the Budget. So far, the government has approved Rs 77,110 crore under the scheme, out of which Rs 41,118 crore has been released to states. The scheme aims to encourage states to undertake capital expenditure and has earmarked Rs 80,000 crore for it.