Financial Incentives for Consumers:
- Scrap value for the old vehicle given by the scrapping centre, which is approximately 4-6% of ex-showroom price of a new vehicle.
- Also, consumer will receive 5% rebate on purchase of new vehicle against the scrapping certificate.
- Above points clearly implies that around 10% of the value of price of new vehicles will be received as rebate by the consumers.
- State governments advised to offer a road tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles. Increase in GST collection for both Central & State Government can be the after-effect of this policy as there will be new purchase of vehicles.
- Registration fees to be waived off for the purchase of a new vehicle against the scrapping certificate.
Positive Impacts of Vehicle Scrappage Policy:
i) Big Boost for Indian Auto Industry and Turnover:
- Current Turnover of Indian Automobile Industry is Rs. 4.5 Lakh Cr. After the introduction of Vehicle Scrappage Policy, the turnover of the industry can increase by 2.2 times and reached to the level of Rs 10 Lakh Cr. in coming 5 years.
- The recycling of raw material derived from scrapping of old vehicles is expected to reduced manufacturing cost of OEMs by 30% to 40%, which also provides a profitable base for the auto companies, which provides them the opportunity to focus on exports as well.
- Currently, Export Turnover of Auto Industry in India is 1.45 Lakh Cr. which might rise by nearly 2 times and can reach to 3 lakh crores in next 5 years post the introduction of this policy.
- Overall, Indian Auto Industry can move from its current turnover of Rs. 6 lakh Cr. to Rs. 13 Lakh Cr. by 2026.
Indian Auto Industry Turnover & Exports
ii) Helps in reducing India’s Huge Crude Import Bills:
- As per the stats, India’s crude import bills are likely to be increase up to Rs. 18 Lakh Cr. which will be mainly driven by low-mileage old vehicles.
- Introduction of Scrappage Policy will increase efficiency as the old polluting vehicles will be scrapped.
- Moreover, it will boost to new technologies with better mileage of vehicles.
- Also, the vehicle scrappage policy will promote Green fuel and electricity.
- The above pointers if worked effectively then it could certainly reduce the India’s Crude Import Bills.
iii) Increase in Vehicle Demand and projection of robust growth in revenue:
- According to the data submitted by Mr. Nitin Gadkari in Lok Sabha, around 1.02 Cr. vehicles are likely to go under scrapping as per the policy.
- Also, this policy might act as a big boost to “Aatmanirbhar Bharat” Campaign.
- Auto Industry may also get benefitted from the Production Linked Incentive (PLI) Scheme.
- Below are the estimated number of types of vehicles which can go under scrapping as per the Scrappage Policy:
Estimated Number and Types of Vehicles
iv) Employment Opportunities:
- Auto Industry has a potential of creating around 3.7 Cr. jobs directly as well as indirectly.
- Around Rs. 10,000 Cr. will be infused in the Automated Fitness Centre which may create nearly 50,000 jobs.
i) Implementation Challenges:
- Prime concern for launching of this policy will be regarding lack of infrastructure to build well organized scrapping centers and recycling as per standards.
ii) To further incentivize the consumer, there should be GST concessions on purchase of new vehicles. Currently, Tax rate in India on purchase of new automobiles are very high which ranges between 28% to 43%. Vis-à-vis, GST on Electric Vehicles (EVs) is just 12%.
The Vehicle Scrappage Policy announced by the Finance Minister in 2021 has gained its shape in the latest draft presented by Union Minister Nitin Gadkari in Lok Sabha. The policy comprises several proposals which may prove to be boon for Indian Auto Sector and economy as well. From environment point of view, this policy will help in scrappage of old polluting vehicles and will assure environment-friendly vehicles running on the road. This policy is an appreciable move by government, but certain headwinds exists and same has be to be looked by government for better implementation of the policy.