Hasten vehicle scrapping

• Nirmala Sitharaman has called for expediting the implementation of the vehicle scrappage policy and improving data as well as road connectivity in hilly regions and aspirational districts of the country.
• While the Budget had a capital outlay of Rs. 5.54 lakh crore, she said PSUs need to complement the CAPEX efforts.

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 of 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 the incentive to owners of old vehicles to scrap old and unfit vehicles.

Issues with the new policy:

• 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."