Scrap and Grow

Business Standard     9th November 2020     Save    
QEP Pocket Notes

Context:  India may soon announce a policy on scrapping vehicles as the demand for cars and commercial vehicles has come down.

Benefits of a vehicle scrapping policy

  • Economic benefits:
  • Increase demand
    • Reduction in  steel imports - since metal from scrapped vehicles can be recycled
  • Employment opportunities in large scrapyards.
  • Environmental benefits: Improve auto emission standards by allowing vehicles older than 15 years to be scrapped.

Possible features of Indian vehicle scrapping policy

  • May not be a time-bound scheme like in the US and China
  • Unlikely to involve a budgetary outgo in the form of a subsidy
  • Auto makers may compensate buyers who scrap old vehicles for new ones 
  • Provision of Tax break- will involve consultation with states.
  • Differential policy for cars running on green energy.

Issues to be considered before finalization of the policy

  • Increased costs: Proposed policy will increase the re-registration certificate cost by many times. E.g. It may increase to Rs 15,000-20,000 from the current fee of Rs 600
  • Given the care given in India to a privately owned car, it is possible to use the car for 20 years without re-registration instead of 15 years
  • The scrapping of luxury cars should be avoided: since luxury cars are a minuscule segment of the market and their scrapping may not galvanize the production lines

Conclusion: Final scrapping policy is long overdue and should be announced sooner rather than later.

QEP Pocket Notes