Comments
The 2019 general elections seem to have cast a shadow over the much-talked-about new scrapping policy for commercial vehicles.
The proposal, which was to be sent to the Union Cabinet, is seeing fresh round of discussions.
The Road Ministry is engaging with States to make the policy more effective, sources in the know said adding that the Ministry is also considering offering interest rate subvention for buying new vehicles. “Bringing such a policy in an election year is difficult,” a senior official told BusinessLine .
The government can ill afford to face the wrath of transporters at this juncture as the policy involves fresh investments in buying lakhs of trucks and other heavy vehicles, which will lead to higher expenditure for transporters.
Earlier, in April-May, the Road Ministry did prepare the Cabinet note. However, the Prime Minister’s Office (PMO) advised the Ministry to hold further discussions with the States to make the draft more effective. The Ministry, which had started fresh discussions, is also trying to sweeten the mechanism to lessen the burden on transporters — by offering interest rate subvention for buying new vehicles.
The proposed policy aims to curb vehicular pollution by scrapping old commercial vehicles that emit toxic gases. The policy will define ‘old vehicles’ for mandated scrapping. Vehicles manufactured between 1990 and 2000 are likely to be brought under the ‘old vehicle’ category which means all commercial vehicles produced during this period will be scrapped.
Based on the parameters such as usage and emission, over 7 lakh vehicles will have to be scrapped, which is 25 per cent of all vehicles produced during the period and still on road.
Industry growth
According to estimates, once the policy rolls out the size of automobile industry is expected to grow to ₹8 lakh crore from ₹4.5 lakh crore now. Higher demand will lead to capacity addition which means more job creation, said the official adding that both Centre and States will earn higher GST revenues too. A back of envelop calculation suggests the States will get roughly ₹6,000 crore while the Centre will get ₹4,000 crore. Higher revenue for Centre means more money for States too, as Centre distributes 42 per cent of its revenue from various taxes to the States.
He also explained that scrapping of old vehicles will lead to availability of metals to be recycled. This will cut the cost of production which, in turn, will lead to lower retail price. “Apart from this, we are also working on how to lessen the interest burden for the transporters. The Government will earn more, so a part of that can be used to help the transporters get loan at cheaper rate,” the official said.
The proposed policy will need the nod of the Union Cabinet and the GST Council. The Road Ministry’s proposal to the GST Council also comprises two components: First, either exempt the transaction related to the scrapping or levy 5 per cent GST under the Reverse Charge Mechanism; and second to prescribe GST rate of 18 per cent from the present 28 per cent for the replacement vehicle.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.