Miheer Jain and Badri Narayanan
The long-awaited draft policy on vehicle scrappage is now accessible. The proposal specifies the guidelines for identifying and scrapping end-of-life vehicles. It also has directives for scrapping facilities for sustainable waste recycling and material recovery. This is a significant move in the development of infrastructure for the organized and scientific scrapping of old automobiles. It also has far-reaching implications for emissions/pollution reduction in India. There was a dire need for such a policy in India’s automobile system. According to the statistics , about 51 lakh LMVs are exceeding an age of 20 years in India, around 34 lakh LMVs exceeding 15 years, and about 17 lakh medium/heavy commercial vehicles exceeding 15 years.
THE SCRAPPAGE ECOSYSTEM
According to the released draft of the policy, passenger vehicles ageing over 20 years and commercial vehicles ageing over 15 years fall under the bracket of scrutiny. These vehicles would have to undertake a fitness and emission test covering a variety of parameters, failing which they would be mandatorily scrapped.
SETTING UP SCRAP YARDS AND FITNESS CENTRES
Automobile manufacturers such as Maruti Suzuki, Toyota, and Mahindra and Mahindra have announced their investments in setting up vehicle dismantling centres in the country, with the expectation that these centers produce substantial revenue in the coming years until vehicle scrapping becomes prevalent. Other automobile makers are expected to do the same.
CONTRIBUTION OF THE GOVERNMENT
The government has shown its commitment to investments of about Rs 10,000 crore both from the government and private sector enterprises for the establishment of these centers.
COMPLIANCE
Certain deadlines would have to be kept in mind by all industry stakeholders. These are to ensure an expedited result of the scheme on the ground. The rules will be effective from 1 October 2021. The time bar on the government’s unfit vehicles is 1 April 2021 while all the heavy and other vehicles have a mandate of getting their fitness tested by 1 April 2023 and 1 June 2024 respectively. The government also plans to levy an extra green cess on such passenger and commercial fleet owners which would eventually push them to comply with the policy and phase out their old vehicles.
Non-compliance with the policy would warrant a mandatory de-registration after 20 years if the vehicles are found to be unfit or have failed to renew registration. From the 15th year of initial/original registration, private cars may be eligible for enhanced re-registration.
INCENTIVES OFFERED BY THE POLICY TO VEHICLE OWNERS
Vehicle owners who voluntarily scrap their cars can get a road tax rebate ranging from 15% to 25% and a full waiver of registration fees for their next new vehicle purchase. Automobile dealers would now be required to have a 5% discount in consideration for a car scrapping certificate. Also, car owners can get a value for their old cars from scrap yards that are about 4% to 6% of the price of a new vehicle.
OVERALL MACRO-BENEFITS
These scrap yards would act as a source for generating employment for the local people and the steel made out of the scrapping process would be supplied to the automobile industry and other industries at a cheaper rate than the market ensuring availability of low-cost raw materials to a variety of industries. This would help in triggering economic growth for the automobile industry.
It would ensure achieving of an aim of cutting 25% to 30% air pollution caused by vehicles and also result in economic fuel efficiency and better vehicular safety.
WHAT INDUSTRY EXPERTS HAVE TO SAY
According to the statement of Satyakam Arya, MD and Chief, Daimler India Commercial Vehicles, “We have long advocated for a well-designed, incentivised ‘end of life’ policy that boosts demand, improves safety, and supports the environment by encouraging commercial vehicle owners to exchange their older vehicles for new ones, meeting current emissions norms. Only a joint effort by government, industry and the customer can result in a scrappage policy that offers true safety, economic and environmental benefits.” The question of whether or not the introduced draft of the policy serves its purpose as a well-thought and deliberated executive framework is not up for debate. But the draft policy overlooks an incentive to plan the policy as an important support program for green recovery in the industry, resulting in broader and faster air quality benefits. This program has only ‘advised’ state governments and the auto industry to provide voluntary discounts to owners of old cars.
The Central government has not committed to making it a fiscal stimulus policy in the post-Covid-19 era to replace ageing heavy-duty vehicle fleets with Bharat Stage VI vehicles or to connect other segments with aggressive electrification.
Miheer Jain is a research assistant at Infinite Sum Modelling Inc, while pursuing legal studies at NMIMS School of Law, Mumbai. Dr Badri Narayanan is the founding director of Infinite Sum Modelling (ISM), Seattle and a senior economist with University of Washington, Seattle.