Vehicle Scrappage Policy In India 2021

Vehicle Scrappage Policy In India 2021

 The Vehicle Scrappage Policy, launched on August 13, 2021, may be a government-funded programme to exchange old vehicles with modern & new vehicles on Indian roads. The policy is predicted to scale back pollution, create job opportunities and boost demand for brand spanking new vehicles. Several countries including the US, Germany, Canada and China have introduced vehicle scrappage policies to spice up their respective automotive industries and curtail vehicular pollution. Large automakers are onboarding this policy by launching scrappage centres including CERO by Mahindra & Mahindra (2018) and Maruti Suzuki Toyotsu by Maruti Suzuki and Toyota (2019). This policy also supports India’s ‘Green India’ mission, because it creates space for a cleaner fleet of vehicles.

According to the new policy, commercial vehicles aged >15 years and passenger vehicles aged >20 years will need to be mandatorily scrapped if they are doing not pass the fitness and emission tests. The policy doesn't treat a vehicle as scrap simply because of its age, but considers other factors like quality of brakes, engine performance et al.. the target is to end old cars, reduce urban pollution levels and stimulate automotive sales, which continues to record slowdown amid India’s post-COVID recovery phase. Additionally, the vehicle scrappage policy is additionally said to be a neighborhood of a bigger stimulus package majorly requested by original equipment manufacturers (OEMs) to stir their demand.

Under the policy, automated testing stations and scrapping facilities are going to be found out in phases. Currently, 75 stations are proposed under Phase 1; this count will gradually proportion to 450–500 stations across the country. the govt has also welcomed private players to take a position in fixing such stations through partnership with the state governments. the govt also plans to line up 50–70 facilities for scrapping vehicles within the next 4–5 years. An industry body—the Society of Indian Automobile Manufacturers (SIAM)—has urged the govt to permit dealer workshops to function as inspection and certification stations, as establishing new ones might not be commercially viable and delay the policy developments and implementation.

The Vehicle Scrappage Policy extends many obvious benefits, besides pollution control and improved road factor of safety. Union Minister Mr. Nitin Gadkari has highlighted that raw materials derived from scrapped vehicles like copper, rubber, steel, aluminium and plastic are often reused in new vehicles, which may help reduce the worth of latest vehicles and subsequently, boost sales.

Some incentives for scrapping old vehicles and buying new ones are as follows:

Manufacturers can hand over to five discount for purchasing new vehicles

Zero registration fee for brand spanking new vehicle purchase

Owners can receive scrap value equivalent of 4–6% of ex-showroom price of latest vehicles

States can hand over to 25% and 15% rebate on road tax for private and commercial vehicles, respectively

According to the Ministry of Road Transport and Highways (MORTH), India is home to 2.1 crore vehicles that are older than 20 years, with the very best number in Karnataka (39.4 lakh), followed by Delhi (36.1 lakh), Uttar Pradesh (26.2 lakh), Kerala (20.6 lakh), Tamil Nadu (15.9 lakh) and Punjab (15.3 lakh). The policy will likely end in the subsequent projected gains:

30% boost for the Indian industry, from the present Rs. 4.5 lakh crore (US$ 61.46 billion) turnover to Rs. 10 lakh crore (US$ 136.59 billion) over the approaching years

Export component of Rs. 1.45 lakh crore (US$ 19.81 billion) within the current turnover is probably going to travel up to Rs. 3 lakh crore (US$ 40.98 billion)

Decrease India’s huge Rs. 10 lakh crore (US$ 136.59 billion) crude import bill

Attract new investments of ~Rs. 10,000 crore (US$ 1.37 billion) and make as many as 35,000 jobs

The Vehicle Scrappage Policy has been welcomed by most states. Most car dealers in Gujarat have expressed optimism at the new policy enforcements. Mr. Pranav Shah, Chairman, Federation of Automobile Dealers Associations (FADA) in Gujarat, believes that the scrappage policy will boost sales of latest vehicles on the rear of proposed discounts on new car purchases against vehicle scrappage certificates. Other experts within the industry have stated that the turnaround of cars will reduce, generating more demand for brand spanking new cars. The state of Maharashtra is outlining SOPs (that are going to be soon rolled out) for fixing digitised scrapping centers. The Delhi Government issued a public notice prohibiting plying of over 15-year-old petrol vehicles and over 10-year-old diesel vehicles. The owners of such vehicles are advised to urge their vehicles scrapped through authorized facilities at the earliest, failing which the vehicles are often impounded.

The Tamil Nadu govt. has reported mixed responses towards the scrappage policy, raising concerns of householders of second-hand or third-hand cars as they'll have a troublesome time finding potential buyers. Additionally, some stakeholders from the state also believe that a well-maintained car fetches an honest price regardless of its age. Mr. Wilson Joseph of BRK Automobiles, who owns a second hand cars business in Chennai, expressed doubts over how the policy will cater to the second-hand cars market. The policy has received an identical response from lorry/truck owners within the state. 

However, at a broader level, the policy features a good mixture of incentives for brand spanking new vehicle buyers and automotive dealers and hence, is anticipated to get positive leads to the near future. this may also pave the way for an entire new business segment—‘Scrappage Facility’—which will flourish during a well-organised manner. Additionally, the policy addresses the intent of all stakeholders from exporters, importers, car dealers, micro, small & medium enterprises (MSMEs), original equipment manufacturers (OEMs) and end consumers. Prime Minister Mr. Narendra Modi, while introducing the policy stated, “The policy is a crucial link to realize the circular economy of waste to wealth. it'll also energise India's auto sector and metal sector under the principles of reuse, recycle and recover.” The Vehicle Scrappage Policy is predicted to really touch every aspect of the car industry in India, the results of which is predicted to churn within the years to return.

India is predicted to possess about 22.5 million vehicles by 2025 of which 18 million would be two-wheelers, about three million are estimated to be personal vehicles and about 1.2 million would be commercial vehicles. Therefore, the govt of India’s recently announced scrappage policy that mandates all commercial vehicles of quite 15 years and passenger vehicles of quite 20 years be mandatorily scrapped on failing the fitness and emission tests along side those used for quite 15 years by the govt departments. This policy does promise tons for the country. The recycling of vehicles can have a mess of advantages for the environment, the economy, and therefore the consumers. With the utilization of advanced recycling centers, like those in use in Japan and Europe, about 85 percent to 90 percent of fabric recovery from vehicles is feasible within the initial stages, with rates in more than 95 percent.

Raw material and forex savings

One of the advantages of the scrappage policy is that the recycling of twenty-two.5 million ELVs [End of Life Vehicles] could generate five million tonnes of steel scrap, a further 1.2 million tonnes of aluminum, and about 0.2 million tonnes of copper. additionally, automotive manufacturers could also reuse a number of the opposite material beginning of the shredding process as has been seen in other parts of the planet. as an example, with the utilization of recycled polyfoam plastic within the seat cushions, scrap bumpers are reformulated and reused to form mud and splash guards, recycled plastics are wont to create upholstery for passenger seat cushions, and more.

In India, in FY19, only 35 percent of India’s metal scrap consumption was met by domestic collection. the remainder was fulfilled through imports, with the country importing seven million tonnes of ferrous scrap in FY19, which is predicted to double by FY25. The recycling of the expected ELVs by 2025 can reduce ferrous scrap imports by five million tonnes, thus leading to significant exchange savings.

Environmental benefits

Landfill space is scarce in India and therefore the landfill demand for disposal of municipal and industrial waste is already above the availability. Waste generated annually in India is predicted to rise from 62 million tonnes in 2019 to 165 million tonnes by 2030, which can ideally require a landfill area of 160,000 acres (assuming a landfill site that's 10 metres high and may hold 20 years’ of waste). The recycling of vehicles up to 90 percent will reduce the landfill requirements from scrap vehicles by 46 acres by 2025.

India has also seen a gentle upgrade in tailpipe emission limits of vehicles, therefore, removal of older vehicles would also help in reducing pollution. as an example, emission reduction by taking a less-than 10-year-old truck or bus off the road and replacing it with a recent model could lower PM emissions by 28 percent, HC+NOx (hydrocarbons and nitrogen oxide) emissions by 18 percent, and CO2 emissions by 17 percent. additionally, there would even be an indirect reduction in pollution levels as production processes of virgin materials, especially mining activities, involve significant emissions of greenhouse gases like CO2. Recycled scrap material, however, features a much lower carbon footprint compared to virgin material. as an example, steel made up of 97 percent recycled steel has 50 percent less CO2 emissions in comparison with steel made up of ore.

Benefits to the economy and industry

After the devastating effect of the Covid-19 crisis and also a struggle in recouping the investments made for the shift to the BS VI emission regime, the scrappage policy does offer a glimmer of hope for the automotive industry. The announced incentives of a rebate on road tax between 15 percent and 25 percent, a further discount of 5 percent on vehicle price from the vehicle manufacture, disincentives in re-registration of older vehicles also because the scrap value a customer gets from the recycling centre can help boost vehicle sales as was observed just in case of European countries. additionally, recycling facilities found out directly or through tie-ups by original equipment manufacturing (OEM) units could help draw customers for repurchases or also migrate competitor customers to the OEMs brand.

The scrappage policy might be a panacea for several issues, and therefore the setup of ELV recycling centers on a pan-India basis may be a good opportunity for existing and new players within the automotive value chain to capitalise on. additionally, continuous efforts must be made by all stakeholders to iron out the remaining glitches for the policy to be adopted in large numbers.

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