Vehicle scrappage policy to help generate demand for new vehicles, say sources

The much-awaited vehicle scrappage policy would help in curbing air pollution, reducing fuel consumption and curtailing fatalities in road accidents, while generating demand for new vehicles in the country amid the coronavirus pandemic, industry sources said.

The proposed scrappage policy requires support from both the central and state governments, an industry source said.

The governments at both levels would need to come together to make this programme successful by providing fiscal incentives for fleet modernisation, another industry source added.

An incentive based mechanism will make the scheme lucrative and encourage people to scrap their old vehicles and replace them with new ones, he added.

When contacted over the matter, SIAM President Rajan Wadhera told PTI that the industry body has been engaging with the Government of India, requesting for an incentive-based scrappage policy with monetary incentives in the form of 50 per cent rebate in GST, road tax and registration charges.

Similarly, SIAM Director General Rajesh Menon said an incentive based policy will help in mitigating pollution, improving road safety and conserving fuel.

"And more importantly in the current context of impact of Covid-19 on the Indian auto sector, also could kickstart demand," he added.

A vehicle scrappage policy is in the works for some time now. The policy aims to put a cap on the life of vehicles in terms of years run.

Last week, Union Minister Nitin Gadkari had said that the scheme is likely to be finalised soon to boost the automobile sector.

The proposed policy once approved, will be applicable on all vehicles including two and three-wheelers.

Earlier, the policy was sent for a fresh round of consultation with stakeholders on the direction of the Prime Minister's Office.

Gadakri had earlier said that once the policy is approved, India could emerge as a hub for automobile manufacturing as key raw material available from scrapping, like steel, aluminium and plastic are bound to be recycled, bringing down automobile prices by "20-30 per cent".

The government on July 26, 2019 had proposed amendments to motor vehicle norms to allow scrapping of vehicles older than 15 years in a bid to spur adoption of electric vehicles.

In a draft notification, the government proposed renewal of fitness certificates for vehicles older than 15 years every six months instead of the current time-frame of one year.

The notification also provided that newly purchased motor vehicles will be exempted from payment of fees for registration certificate and assignment of new registration mark, if the purchaser produces scrapping certificate of the previously-owned vehicle of the same category issued by the authorised scrapping centre/agency.

The government had first floated a draft voluntary vehicle fleet modernisation programme in May 2016, that proposed to take 28 million decade-old vehicles off the road.