- The much-needed Vehicle Scrappage policy is in the final stages of formulation.
- The implementation could happen in around 15 days to one month.
- The vehicle scrappage policy can neutralise the effect of GST and bring prices under control.
There was massive speculation in automobile industry circles that the Finance Minister would announce the Vehicle Scrappage Policy during the Budget. However, the Budget did not answer their prayers. The Finance Minister made a passing remark that a scrappage policy was in the process of being worked out. It will be announced in due course.
Mr Nitin Gadkari, Union Minister, Road Transport, announced that the Vehicle Scrappage policy was in the final stages. It will be implemented within a fortnight or a month. He announced this when addressing a gathering at the Federation of Automobile Dealer’s (FADA) Auto Summit, 2020. He stated that the services of Kandla Port will be utilised for bringing in the scrapped vehicles from other nations. This move will help the Indian automobile industry to recover critical metal components and reduce the manufacture/import cost.
Dr Pawan Goenka, MD of Mahindra & Mahindra, remarked that a Budget announcement in this regard would have been proper. Though incurring a cost, the scrappage policy could have revived the demand for vehicles by neutralising the effect of GST.
The Apex industry body, SIAM, had welcomed the initiative and the draft guidelines released by the Union Ministry for establishing authorised vehicle scrappage facilities in India. Almost all the developed countries in the world have such a policy in place. It ensures the replacement of old vehicles with new ones. The gains from such a system are two-fold. With the scrapping of old cars, the market for new vehicles gets a boost. Secondly, it reduces environmental pollution, thereby ensuring a greener and cleaner environment.
The Government estimates that more than 28 million vehicles that are at the end of their lifespan (manufactured before March 31, 2005) would be discarded by April 2020. This move opens up a tremendous opportunity for players in the organised vehicle scrappage and recycling industry.
The most significant advantage of the Vehicle Scrappage policy is that it will encourage the vehicle owners to discard their old vehicles and purchase new ones. A robust strategy in place will adequately ensure the disposal.
On approval, one can expect the vehicle scrappage policy to include all vehicles, including two-wheelers and three-wheelers. We will keep you posted in this matter regularly.