MOSCOW (Reuters) -The Russian government expects budget revenues from car scrappage fees to rise sharply this year and next, even though vehicle sales are in steep decline, a document reviewed by Reuters shows.

The draft budget for 2026 forecasts revenues from scrappage fees of almost 1.65 trillion roubles ($19.71 billion), a rise of 46.7% from the 1.12 trillion roubles forecast for 2025.

The government has so far collected a small fraction of that total this year, at 267 billion roubles as of September 23, but said that future revenue increases will be driven by annual indexation of the fee rates, and a recovery in vehicle production.

The Russian Finance Ministry has already said revenues from car scrappage fees will fall well short of budgeted levels this year, and consequently that state funding could fall for some industrial development programmes. 

Industry analysts and automakers expect car sales to fall by around a quarter in 2025 following a two-year-long market recovery that began in 2023.

Sales in the first eight months of this year were already down 23% year-on-year to 773,264 units, with some Russian carmakers switching to a four-day working week because of poor demand.

Both domestic manufacturers and importers are required to pay scrappage fees, which vary depending on vehicle type.

Russia's industry ministry has proposed a new methodology for calculating the fee starting in November, which could lead to further price increases for some types of expensive vehicles.

Russian car manufacturers receive state subsidies as compensation for the fee, which has contributed to rising car prices and a shrinking market.

($1 = 83.7000 roubles)