National Vehicle scrappage policy

• IAS NEXT, Lucknow
• 25, Nov 2021

Reference News:

The Government is considering a proposal to give buyers additional concessions on buying new vehicles after scrapping of their old vehicles.

• The final decision (on providing more incentives under the National Automobile Scrappage Policy) will be

taken by the finance ministry and the GST Council.

About the Vehicle Scrappage Policy:

1. Old vehicles will have to pass a fitness test before re-registration and as per the policy government commercial vehicles more than 15 years old and private vehicles which are over 20 years old will be scrapped.
2. As a disincentive, increased re-registration fees would be applicable for vehicles 15 years or older from the initial date registration.
3. The state governments may be advised to offer a road-tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles to provide incentive to owners of old vehicles to scrap old and unfit vehicles.

Significance:

• The vehicle scrapping policy is aimed at creating an eco-system for phasing out unfit and polluting vehicles in an environmentally friendly and safe manner.
• The initiative will promote a circular economy and make the process of economic development more sustainable and environment friendly.
• The policy will also bring in investments of around Rs 10,000 crore and create 35,000 job opportunities.

Issues with the new policy:

1. Limited incentive and poor cost economics for trucks.
2. Lack of addressable volumes for other segments.
3. The potential benefit from scrapping a 15-year-old, entry-level small car will be ₹70,000, whereas its resale value is around ₹95,000. That makes scrapping unattractive.

Need of the hour:

With this background, for the scrappage policy to be seamlessly implemented, we should have a comprehensive plan in terms of removing ELV (End of life vehicles) from the road. Freight transporters need stronger financial support. However, that said, it is important to note that unless old fleet vehicles are off the road, the benefits of implementation of BSVI vehicles will not be fully leveraged.