Will Scrappage Policy stride the Economy?

So, here we are with something you all must be wondering about.

Have you heard our Finance Minister- Smt. Nirmala Sitaraman’s Budget speech 2021?

YES “SCRAPPAGE POLICY”

Scrappage policy was one of the biggest talking points from the Finance Minister’s speech at the Union Budget 2021, it was an official announcement to soon introduce a voluntary vehicle scrapping policy in India.

This was pending for a long time. In May 2016, the Government of India proposed a draft Voluntary Vehicle Fleet Modernisation Programme (V-VMP). According to which there was a plan to take 28 million decade-old vehicles off-road.

On 1st Feb 2021 in Union Budget, scrappage policy was finally announced and will come into effect from 1st April 2022.

What Scrapping Policy is about?

Under this policy, Vehicles that are older than 15 years (in the case of commercial vehicles) and 20 years (in the case of personal vehicles) will be scrapped and targeted as they are approaching the end of life. The plan is to off-road 1 crore light, medium and heavy vehicles. So Scrap policy is all about pulling out unfit-vehicles off the road and then it will be sent to scrapyards where these vehicles will be disassembled and their useful components will be recycled.

The policy would cover an estimated 51 lakh Light Motor Vehicles (LMVs) that are above 20 years of age, while another 34 lakh LMVs are above 15 years. It would also cover 17 lakh medium and heavy motor vehicles, which are above 15 years, and currently, without valid fitness certificates.

Union Minister Nitin Gadkari made the details known in Parliament and said more than 20 year old personal vehicles will be de-registered from June 1, 2024, if they fail in an automated fitness test or their registration certificate is not renewed and same in case of 15 year-plus commercial vehicles will be deregistered from April 1, 2023.

Don’t Worry!!

This is a voluntary policy where you will have a choice to scrap it or use it for more time. But, if you choose to drive your old vehicle then your vehicle has to pass a fitness test. And if it didn’t pass and you are still using it on the road, then you have to face substantial penalties. This will be a fully automated fitness test facility.

YES, Fully Automated Fitness Test Facility, It Means! No chances of human intervention.

The government will be setting up centers on a public-private partnership basis for automatically testing the fitness of vehicles. And those vehicles that didn’t pass the fitness test will be sent for scrapping. Additionally, even vehicles older than 8 years passing automated fitness tests will be subjected to a Green Tax, it’s an attempt to protect the environment and curb pollution while vehicles like electric vehicles, strong hybrids, and those running on alternate fuels like CNG, ethanol, and LPG will be exempted, so this will be more expensive as additional 10% to 25% of road tax has to be incurred, at the time of the renewal of the vehicle’s fitness certificate.

But YES, there’s a great Profitable deal too!!!

The government is planning on it and announced some fiscal incentives for scrapped vehicles. When you are scrapping old vehicle and buying a new one, you will be entitled for following incentives:

1. Scrap value equivalent to 4-6% of ex-showroom price of new vehicle.
2. Zero new registration fee.
3. Vehicle manufacturers can give up to 5% discount for buying new vehicles.
4. States can give up to 25% & 15% rebate on road tax for personal & commercial vehicles respectively

"Those going for the scrapping of their vehicles will get some benefits from the manufacturers. In fact, scrapping policy will prove to be a boon... not only it will boost the economy, benefit automobile sector but also check vehicular pollution," - Union Minister Nitin Gadkari

So now, you must be thinking what is the need for this policy and why it’s crucial to be implemented as soon as possible?

We are aware of the pollution level of India, and over 27% of air pollution is caused by vehicles and older vehicles pollute 10-25 times more than a modern vehicle. Have you ever thought about how badly it's polluting the environment and also adversely affecting your health?

Old vehicles tend to consume more fuel as the quality and efficiency of vehicles get deteriorated with time. Also, with time vehicles often need maintenance and this adds up to your expenses. So, here it is all right to say that old vehicles gradually become a burden on society and on an individual as well. Maybe now it's time to break off all these by scrapping policy.

It is believed that implementing a scrapping policy will give in many positive outcomes, and also contribute to strengthen the disrupted economy caused by Covid-19. Our Finance Minister during the budget also announced a double import duty from 7.5- 10% to 15% on specified auto parts like ignition wiring sets, safety glass, parts of signalling equipment, vehicle frames, braking, systems, steering etc.  A strong “Make in India” push, this will promote local manufacturing and exports.

Here is a look at key takeaways of the positive outcomes of this scheme.

• By scrapping and off-roading old vehicles causing pollution, will help in reducing pollution.
• Slash India’s Rs 10 lakh crore expenditure on crude imports. As we ship a lot of oil from overseas and so if there will be fewer fuel-ingested vehicles on road, this policy can turn down imports bills to some extent and so the burden on imports.
• This policy has the power to escalate sales as if you scrap your old vehicles, you may think to buy new, so it directly boosts the Indian automobile sector and also, can strengthen demand for Electric and environment-friendly vehicles.
• Recycling materials like steel, aluminum, plastic, rubber, etc. from scrapped vehicles can shrink manufacturing company’s costs by 30 to 40% and be used in the manufacturing part. Customers are likely to get new vehicles up to 30% cheaper.
• The government is also exuded confidence and expecting a 30% hike in automobile sector turnover to Rs. 10 lakh crores and looking for a rise in exports to Rs. 3 lakh crores.
• By dint of this policy, the automobile industry will lead to new investments of around Rs 10,000 crore and create as many as 50,000 jobs.

So, your OLD VEHICLE ...!!!

If scrapped, it will be beneficial for society, the environment, and you as well. As in place of your old vehicle, the new one will be more advanced, will come with proper safety measures, fuel-efficient engines, high standards and new technology. This will ensure passengers/yours safety at first and then to society.

The voluntary vehicle scrapping policy is a thrust of the Indian Government to make India a global automobile manufacturing hub. This scheme also aids the pollution initiative taken by the government.

So, from where we are looking at this policy at a primary level it seems to be very beneficial for all of us, but we also have to wait for policy implementation and see how the government will motivate old vehicle owners to do so, this will be a difficult task.

So here the question is -Will these expected figures meet actual ones?

What do you think?