RSTV: THE BIG PICTURE- VEHICLE SCRAPPAGE POLICY – INSIGHTSIAS


Introduction:

Union Transport Minister Nitin Gadkari announced the much awaited vehicle scrappage policy. Speaking in Lok Sabha, he said the policy aims to keep old polluting vehicles from plying on roads. He highlighted that there are 51 lakh vehicles in India which are older than 20 years, 34 lakh vehicles which are more than 15 years old and around 17 lakh vehicles older than 15 years, but do not have vehicle fitness certificates. He said, old vehicles pollute air 10-12 times more compared to vehicles that are fit, and also pose a risk for road safety. Now, with this policy being announced, commercial and private vehicles will be de-registered after 15 and 20 years respectively and their re-registration will be discouraged. Owners of old vehicles will get strong incentives to scrap old and unfit vehicles. Further, the new vehicle scrappage policy will be a win-win proposal for the auto industry. According to Nitin Gadkari, scrapping old vehicles will lead to increased demands for newer vehicles, which will boost the auto sector. And the move will also both the Centre and states to garner more GST. The policy is likely to come into effect later this year.

Vehicle Scrappage Policy:

• Old vehicles will have to pass a fitness test before re-registration and as per the policy government commercial vehicles more than 15 years old and private vehicles which are over 20 years old will be scrapped.
• As a disincentive, increased re-registration fees would be applicable for vehicles 15 years or older from the initial date registration.
• The state governments may be advised to offer a road-tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles to provide incentive to owners of old vehicles to scrap old and unfit vehicles.

Need for introduction of vehicle scrappage policy:

• Enforcement will be key to get them scrapped once they are found unfit for use and to stop them from moving to smaller towns.
• States must also come on board to provide road tax and registration concessions, while the automobile industry is expected to sweeten the deal with genuine discounts on new vehicles.
• Transport Minister, who has had limited success with enforcement of the amended Motor Vehicles Act of 2019 because States are not entirely on board, has the difficult task of ensuring that the scrappage plan gets their support, and the backing of manufacturers who stand to benefit from a spurt in demand.
• Heavy commercial vehicles, which contribute disproportionately to pollution 1.7 million lack fitness certificates pose the biggest challenge.
• Many of these cannot be replaced quickly in the absence of financial arrangements for small operators, who have opposed the new measures.

Significance:

• The vehicle scrapping policy is aimed at creating an eco-system for phasing out unfit and polluting vehicles in an environmentally friendly and safe manner.
• The initiative will promote a circular economy and make the process of economic development more sustainable and environment friendly.
• The policy will also bring in investments of around Rs 10,000 crore and create 35,000 job opportunities.

Issues:

• Limited incentive and poor cost economics for trucks.
• Lack of addressable volumes for other segments.
• The potential benefit from scrapping a 15-year-old, entry-level small car will be ₹70,000, whereas its resale value is around ₹95,000. That makes scrapping unattractive.
• Also, the government do not have any standard operating procedures (SOP) for setting up of vehicle scrapping centres.
• Formulating a policy without having the capacity will lead to accumulation of old vehicles like solid wastes.
• Regulation of pollutants released during scrapping. The scrapping of Vehicle will release toxic metals like mercury, lead, cadmium or hexavalent chromium.
• If not properly regulated, it will pollute the environment and have long-lasting consequences.

Way Forward:

• The Scrappage policy has the potential to meet the government-set target of 30-40 percent electrification of the vehicle fleet by 2030.
• With this background, for the scrappage policy to be seamlessly implemented, we should have a comprehensive plan in terms of removing ELV (End of life vehicles) from the road. Freight transporters need stronger financial support.
• However, that said, it is important to note that unless old fleet vehicles are off the road, the benefits of implementation of BSVI vehicles will not be fully leveraged.
• But it can be sustainable only when the government provide adequate support to Electric Vehicles such as by creating the necessary infrastructure for charging, manufacturing battery packs etc.
• The scrappage scheme should incentivise replacement of old vehicles with EVs. On the other hand, the government should also frame a policy to reduce the purchasing of traditional petroleum-powered vehicles.
• In the Electric Vehicle Policy of the Delhi government, they linked scrappage incentives with buying of electric vehicles. Such a special linkage of policy is necessary at the national level to promote the electric vehicle.

Conclusion:

• Ecological scrapping, as a concept, must lead to high rates of materials recovery, reduce air pollution, mining and pressure on the environment.
• Vehicle scrappage and replacement is seen internationally as a route to rejuvenate COVID-19-affected economies by privileging green technologies, notably electric vehicles (EVs).
• It is also can be seen as an initiative to achieve net zero emissions by mid-century under Paris Agreement commitments. India’s automobile ecosystem is complex, with dominant, legacy motors spanning fossil-fuel driven vehicles and a nascent EV segment.