Vehicle Scrappage Policy – The Big Picture – RSTV IAS UPSC

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TOPIC: General Studies 2:

• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

In News: Union Transport Minister Nitin Gadkari announced the much awaited vehicle scrappage policy and said the policy aims to keep old polluting vehicles from plying on roads.

• There are 51 lakh vehicles in India which are older than 20 years, 34 lakh vehicles which are more than 15 years old and around 17 lakh vehicles older than 15 years, but do not have vehicle fitness certificates. 
• Old vehicles pollute air 10-12 times more compared to vehicles that are fit, and also pose a risk for road safety. 
• Both commercial and private vehicles will be de-registered after 15 and 20 years respectively and their re-registration will be discouraged. 
• Owners of old vehicles will get strong incentives to scrap old and unfit vehicles. 
• Further, the new vehicle scrappage policy will be a win-win proposal for the auto industry.
• The scheme would come in effect from April 1, 2020, coinciding with the implementation of the BS-VI norms.

Salient Features

• Fitness Tests: The new policy provides for fitness tests after the completion of 20 years in the case of privately owned vehicles and 15 years in the case of commercial vehicles. Any vehicle that fails the fitness test or does not manage renewal of its registration certificate may be declared as an End of Life Vehicle.
• Government Vehicles: All government vehicles and those owned by PSUs will be de-registered after 15 years.
• Phased manner of implementation: The policy will kick-in for government vehicles from April 1, 2022. Mandatory fitness testing for heavy commercial vehicles will start from April 1, 2023, and for all other categories of vehicles, including personal vehicles, it will start in phases from June 1, 2024.
• Incentives for Scrapping: Policy includes Central advisories to States to give up to 25% rebate in road tax for personal vehicles and up to 15% rebate for commercial vehicles. The government will also offer waiver of registration fees on the purchase of new vehicles.
• Incentive for automakers: Central government to issue advisory to auto makers to offer the incentive of a 5% rebate for those who buy a new vehicle after producing a scrapping certificate.
• Disinventivicing Older Vehicles: Older vehicles pollute the environment 10 to 12 times more. As a disincentive, increased re-registration fees would be applicable for vehicles 15 years or older from the initial date registration.

Benefits of the Policy

• Boosts Automobile Sector: The policy pushes for buying of new vehicles by phasing out older vehicles. It is estimated that automobile industry in India will see a jump in turnover to ₹10 lakh crore from ₹4.5 lakh crore.
• Increase government’s revenue collection from the sale of new vehicles.
• Help reduce pollution: Older vehicles are known to pollute environment 10-12 times more than new vehicles, thus this policy is a step in reducing pollution.
• Improve fuel efficiency: Older vehicles performance is lower thereby consuming more fuel. Replacing older vehicles with new vehicles will therefore boost fuel efficiency of the economy.
• Spare Parts Prices will fall: The prices of auto components would fall substantially with the recycling of metal and plastic parts.

• Post-COVID Recovery: Vehicle scrappage and replacement is seen internationally as a route to rejuvenate COVID-19-affected economies by privileging green technologies, notably electric vehicles (EVs)
• Creates Recycling Ecosystem: The policy will pave the way for the creation of an ecosystem of vehicular scrapping facilities and a market for recycled raw materials.
• Helps achieve Paris Climate Goals: The policy is also seen as an initiative to achieve net zero emissions by mid-century under Paris Agreement commitments.

Challenges

• Enforcement will be key to get them scrapped once they are found unfit for use and to stop them from moving to smaller towns.
• Federal Challenges: All the States should be on board.
• Backing of manufacturers is also essential who stand to benefit from a spurt in demand.
• Heavy commercial vehicles, which contribute disproportionately to pollution — 1.7 million lack fitness certificates — pose the biggest challenge.
• Disproportionately impacts small operators: Many of these cannot be replaced quickly in the absence of financial arrangements for small operators, who have opposed the new measures.
• Advisory Nature of incentives: Interestingly, the discounts against scrapping certificates are merely an advisory and not a mandate, i.e. it will be up to automakers’ to offer discounts at all.

What more can be done?

• States must also come on board to provide road tax and registration concessions, while the automobile industry is expected to sweeten the deal with genuine discounts on new vehicles.
• The Centre has to arrive at a balance and have incentives that reward manufacturers of vehicles that are the most fuel-efficient.
• Failure to prioritise fuel efficiency and mandate even higher standards and enhance taxes on fuel guzzlers will only repeat the mistakes of vehicle exchange programmes abroad, where full environmental benefits could not be realised, and taxpayers ended up subsidising inefficiency.

Conclusion

Very few vehicles would actually be older than 20 years in the current vehicular population- CRISIL Research said in its policy analysis. Analysts said the benefit offered under the scrappage policy would be 15% of the vehicle’s price. But this advantage would be muted as prices of diesel vehicles were expected to rise 10-15% once the new norms (BS-VI) come into force.

Connecting the Dots:

1. In what ways will Vehicle Scrappage Policy boost the auto sector?
2. How significant will the implementation of Vehicle Scrappage Policy be towards reducing pollution?
3. Electric Vehicles Vs Hydrogen Fuel Cell based Vehicles