Scrappage policy will promote safer, cleaner vehicles, says auto industry

Nandana James Mumbai | Updated on March 18, 2021

The policy will encourage removal of old and polluting vehicles   -  THE HINDU

‘Largely addresses the interests of all stakeholders’

The automobile industry has hailed the voluntary scrappage policy, saying that it would promote safer and cleaner vehicles in India, as well as encourage the removal of old and polluting ones. The much-awaited details of the policy was announced by Road Transport and Highways Minister Nitin Gadkari in Parliament on Thursday.

“The proposed scrappage policy is a welcome move and a step in the right direction to promote safer and cleaner vehicles in India. Provisions in the policy such as compulsory fitness certificate, dis-incentivising re-registration of commercial vehicles after 15 years and private vehicles after 20 years, would encourage removal of old and polluting vehicles from the system,” said a Tata Motors spokesperson.

“Largely, it addresses intents (sic) of all the stakeholders from low import bill for scrap and crude oil, job opportunities for MSMEs, possibility of upside in new vehicle sales for OEMs, low operation cost for vehicle owners, safer and cleaner vehicles for consumers and a sustainable environment for all,” the spokesperson added.

The mandatory scrapping of Government vehicles, which are more than 15 years old, from April 1, 2022 is a step in the right direction, a statement from SIAM said.

Testing infra

SIAM will also engage with the Ministry of Road Transport & Highways and work together on the scheme in greater detail on issues like the best way to expedite the testing infrastructure in a sustainable and scalable manner, the possibility of starting the fitness testing much earlier in the life cycle of the private vehicle, the scope of mandatory fitness-based deregistration versus voluntary incentive/disincentive based scrapping, as well as incentives for encouraging scrappage, the statement said.

Discount on new vehicles

“Scrappage value of vehicle in range of 4-6 per cent of the ex-showroom price, rebate of upto 25 per cent for PV and 15 per cent for CV by State Governments, a 5 per cent discount from OEM’s on a new vehicle and registration fee being waived off will definitely help to excite the customer and make him scrap his old vehicle. It will also revive the ailing CV segment and in turn will boost State exchequer’s revenue on sale of new vehicles,” said Vinkesh Gulati, President - Federation of Automobile Dealers Associations (FADA).

The new policy can help in three ways, said Anuj Sethi, Senior Director, Crisil Ratings. “One, lower the cost of passenger vehicles by 8-10 per cent for most segments; two, afford replacement of older, more-polluting passenger vehicles; and three, increase the availability of key raw materials such as steel, copper and aluminium, which can be recycled to lower the cost of production of new vehicles,” he explained.

The policy is a good mix of both incentives for those who opt to scrap their old vehicles and an additional burden for those who would like to continue with their old vehicles, said Rajeev Singh, Partner and Automotive Leader, Deloitte India. “This fine balance should help in driving old vehicles out of the road, leading to reduction in pollution levels and driving demand for new vehicles across all the segments. This announcement will also lead to creation for more scrapyards in the country and effective recovery of waste from old vehicles,” he said.

Tata Motors also said that it’s awaiting the actual release of the policy to understand its impact on the industry.

Published on March 18, 2021

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