Making A Good Start From Scrap

Context: The Voluntary Vehicle Fleet Modernisation Programme offers striking prospects, yet the challenges need to be addressed.

4 Pillars of Voluntary Vehicle Fleet Modernisation Programme:

1. Voluntary scrapping is based on vehicle fitness and not on any enforced age specification.
2. Scrapping based on objective ‘end-of life’ criteria to be determined by approved testing centres.
3. A recycling-cum-circular economy based on modern scrapyard facilities.
4. A system of incentives and disincentives to drive the whole exercise.

Prospects of the policy

• Economic prospects: Expected to mobilise investment of Rs.10,000 crore through setting up fitness centres and scrapping yards and create 35,000 new jobs.
  • Additional ‘green tax’ collection: As 10 million vehicles are plying on Indian roads without requisite fitness and new vehicles attract one of the highest rates of GST at 28%.
• Environmental prospects: As removal of old vehicles can lead to 15-20% reduction in air pollution and,
  • All new vehicles procured in lieu of a scrapped vehicle will be BS-VI emission norms-compliant.
• Creation of recycling ecosystem: A large number of rusting, damaged vehicles litter India’s countryside as there is no established system for scrapping, which could be cleared up.
  • 70 registered vehicle-scrapping facilities (RVSFs) to be established: These could also cater to scrapping and recycling of materials from other industries, like electronics and consumer durables.

Challenges and concerns 

• Economic hardship to marginal owners of vehicles: 
  • Low scrap value: To be 4-6% of ex-showroom price of a new vehicle. Although many incentives are envisaged, it is yet to be seen how states welcome a cut in their tax pie.
  • Holding on to vehicles older than 15 years will be expensive as the cost for renewal of a fitness certificate may go upto 50 times for commercial vehicles and by eight times for private ones.
  • Green and road taxes and rise in fuel prices could make things truly unaffordable.
• Viability of RVSFs: 450-500 automated vehicle testing stations need to be in place, needing investments ranging from Rs 8-12 crore per centre.

Way forward

• Strengthen incentive structure: GoI could consider a GST reduction for the purchase of a new vehicle against a scrappage certificate entitlement.
• Encourage private-public partnerships: The Society of Indian Automobile Manufacturers (SIAM) has stated that it will work with GoI to set up testing and scrapping centres. It needs to be expanded.