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What is Scrapping Policy for India

A scrappage program is a government budget policy to promote the replacement of old vehicles with modern vehicles. Scrappage policy generally have the dual aim of stimulating the automobile industry and removing inefficient, more polluting vehicles from the road.

India’s vehicle scrappage policy, which is awaiting its final clearance from the Union cabinet, would focus on eliminating the fleet of old polluting commercial vehicles plying on the country’s roads. A well-defined vehicle scrappage policy in India can help create an industry of its own with a business opportunity of $6 billion (Rs 43,000 crore) a year, say automobile sector executives and experts. This policy would cover all segments, including cars and two-wheeler and not just commercial vehicles. Different countries have introduced Scrappage Policies click here to read its affect on other countries.

 

Position of Medium & Heavy Commercial Vehicle Segment

The medium and heavy commercial vehicles segment is the worst-hit following the allowance of extra load-carrying capacity of trucks last year with the introduction of axle load norms read more about axle weight increase norms. This was followed by a general slowdown in key sectors such as real estate, infrastructure, mining and others. According to the Society of Indian Automobile Manufacturers (Siam), wholesales or factory dispatches of medium and heavy-duty trucks fell over 41% year-on-year during April-November. During the same period, the commercial vehicle industry posted a 22% decline in sales.

The commercial vehicle owners will have tough time scrapping older vehicles, not just owners but local mechanics will also get affected, as they usually repair older vehicles, whereas new vehicles are being brought under OEM’s AMC. As the country is facing slowdown, worst hit among other industries are trucking industry. Apart from other areas where a trucker is getting hit like, driver shortage, production slowdown, costlier new vehicles. Considering larger benefits to country the policy is necessary. Increase in the renewal of registration fees of vehicles older than 15 years will discourage the use of older polluting vehicles, including passenger vehicles

Larger Benefits of Vehicle Scrap Policy

  • The proposed policy is seen as a bid by the govt to brace up demand for automobiles
  • The proposed policy will put polluting commercial vehicles off the roads
  • The government expects recycling of metals like steel, copper and aluminium from the scrapped vehicles to help reduce their imports.
  • Annual steel demand of 6 MT may be met locally if old vehicles are scrapped, it will also help save foreign exchange
  • Carbon dioxide emissions can be cut by 17% and particulate matter by 24% if older vehicle are removed from road
  • 8 MT oil would be saved annually if half the BS-II and BS-III vehicles are discarded
  • 9 M vehicles could go off roads by fiscal year 2021 and 28 M by fiscal year 2025
  • It could generate fresh employment and trigger economic growth

 

Incentives to Vehicle Owners

  • Under the draft scheme, the government has stated that a part of the scrap value from the old vehicle may be given as a payback
  • Incentives in the form of lower tax could be offered if a person is buying a new vehicle in place of the scrapped one, state governments can provide tax rebate against scrappage certificates and manufacturers can give discounts

 

 

The draft guidelines on Authorized Vehicle Scrapping Facility (AVSF) in India will help in setting up of such facilities in an organised manner

  • As per the draft AVSF guidelines, individuals, firms society or trust will be allowed to set up scrappage facility subject to meeting eligibility criteria and receiving authorization from licensing authority.
  • The authorization will be valid for 10 years which shall be renewable for another 10 years.
  • Prospective scrappers must have usable treatment with a minimum area of 4,000 sq meter for small vehicles and 8,000 sq meters for all other bigger vehicles.
  • Vehicles which have not renewed original registration, not been granted fitness certificate and those auctioned, impounded and abandoned by any enforcement agency, among others are allowed to be offered for scrapping.
  • The authorized scrapper will issue a digital certificate after the process of scrapping is completes with photographs of cut out chassis. A separate record for scrapped vehicles would be maintained on the VAHAN database by Center.
  • Already the likes of Maruti Suzuki and Mahindra & Mahindra have ventured into the recycling business and there are another half a dozen companies in queue to enter the space, say people in the know. The challenge is that scrap yards will take time to build.

 

Link to Draft of the Policy issued on 14th October, 2019 by Ministry of Road Transport & Highways (MORTH)

Sources – Livemint, economictimes, timesofindia

Video by Mike from Pexels

 

 

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