Voluntary modernisation scheme: replace engines, not vehicles, say transporters

Transporters are pitching for an engine replacement scheme, rather than replacement of vehicles purchased before March 31, 2005, as proposed by the Road Transport Ministry’s “modernisation” scheme.

“If lowering pollution is the main objective, how about having engine replacement schemes? Also, the government can look at providing cleaner fuel, like biodiesel. Or just provide more excise benefits for new vehicles,” Bhim Wadhwa, President, All India Motor Transport Congress (AIMTC), told BusinessLine . Transporters also fear that the scheme could lead to mandatory replacements.

Industry experts, however, have mixed views on the issue with many of them saying the move is more likely to impact unorganised players, as several organised players change their fleet every three-four years, and some others welcoming the move but calling for a law on having an end- of-life scheme for all vehicles.

The “modernisation” scheme proposes benefits in three forms for consumers replacing vehicles bought on or before March 31, 2005. First, it seeks to decide scrap value at recycling and shredding centres. Second, automobile manufacturers are likely to provide special incentives on exchange of older vehicles, as this would trigger sales for newer vehicles. Third, vehicles bought under this scheme can get up to 50 per cent excise duty relief and state road transport undertakings can get full excise relief, subject to the Finance Ministry’s nod.

Wadhwa also questioned the valuation mechanism while pointing out that, at present, it is usually done by the arms of the original equipment manufacturers. India does not have a vehicle scrapping policy, as in developed countries.

“The Centre may, at best, suggest higher annual taxes and a stricter annual IT based-fitness regime to ensure that unfit vehicles, even four years old, do not ply on highways,” SP Singh, Senior Fellow, of Indian Foundation of Transport Research and Training (IFTRT), wrote in a letter to the Finance Minister.

Safexpress, an organised player, said it changed its fleet almost every two-three years. “This move is more likely to impact unorganised players. That said, for controlling pollution through trucks or buses, any vehicle that does not meet the regular fitness tests should simply be stopped from plying,” Vineet Kanaujia, Vice President-Marketing, Safexpress, said.

Hailing the move, Abdul Majeed, Partner, Price Waterhouse, said: “Bulk the of emission issue relates to old vehicles and replacing these will help address the issue significantly.”

The other important aspect will be how this is implemented swiftly and how the old vehicles are dismantled following the ‘best in class’ international norms, he said, adding that India also needs to have a law on end-of-life for vehicles across the country.

Even for passenger buses, bigger cities tend to have a newer fleet. For instance, 90 per cent of Delhi Transport Corporation (DTC)’s fleet of 4,344 has been procured after 2010, said RS Minhas, spokesperson, DTC.

The Road Transport and Highways Ministry has sought comments on the proposed “voluntary vehicle modernisation scheme” for trucks and buses purchased before March 31, 2005.

As per the proposal, the move has the potential to substitute imports by generation of steel scrap of about ₹11,500 crore, crude oil import saving of ₹7,000 crore and replacement of 2.8 crore vehicles.

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