Shares of auto companies rallied on Monday after Finance Minister Nirmala Sitharaman announced a voluntary vehicle scrapping policy to phase out old vehicles.

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Under the scrappage policy, Sitharaman said that there will be a fitness test for vehicles after 20 years in the case of personal vehicles and 15 years in the case of commercial vehicles.

The Nifty Auto index surged over 4 percent post the announcement with all index constituents in the green.

Ashok Leyland jumped the most, up over 10 percent while Tata Motors, M&M, Bosch, Bharat Forge, Motherson Sumi, MRF and Eicher Motors added between 4 percent and 7 percent.

“The vehicle scrappage policy will help promote fuel-efficient vehicles and reduce pollution in our cities. Commercial vehicles over 15 years and personal vehicles over 20 years can be scrapped. Details of this scheme will be made available by the ministries," FM said.

Sitharaman also announced a capital investment of Rs 5.54 lakh crore in developing infrastructure around the country, which is expected to boost the demand for heavy and medium commercial vehicles.

“We will invest Rs 18,000 crore for a scheme to augment public transportation in India. This scheme will boost the auto sector and provide jobs for our youth. It will also create ease of mobility in our cities," said Sitharaman.

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(Edited by : Abhishek Jha)

First Published:Feb 1, 2021 2:25 PM IST