A new vehicular scrappage policy may be taken up in the upcoming Union Budget, sources in the government told CNBC-TV18 on Tuesday. The final decision will be taken by the Finance Ministry and PMO, sources said.

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Union Budget will be presented by Finance Minister Nirmala Sitharaman on February 1. The Budget Session will convene from January 29 and the Economic Survey will be presented on the same day.

Last year, Union Minister Nitin Gadkari had said that the government is set to introduce a vehicle scrappage policy, under which recycling clusters may be established near ports, expressing confidence that India will emerge as the world's leading automobile manufacturing hub in five years. "Now, we are going to start the new scrapping policy, by which old cars, trucks, and buses will be scrapped," the Minister of MSME and Road Transport and Highways had said.

He had said the government has decided to increase the depth of the country's ports by 18 metres, and automobile clusters comprising recycling plants can be set up near the ports.

The minister had added that the material recycled will be useful for the automobile industry as it will reduce the cost of manufacturing cars, buses, and trucks, increasing India's competitiveness in international markets.