Scrap and Grow

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.