Vehicle Scrappage Policy In Its Last Stages For Proper Recycling Opportunities

vehicle scrappage policy

The vehicle scrappage policy is in its final stages for the recycling of the scrap of old vehicles, making a huge development in the automobile industry.

On 20th Feb, Nitin Gadkari, Union Road and transport minister sat in conversation with the finance ministry proposing the idea of supporting newer technologies for research and development in the automobile industry. With a properly curated vehicle scrappage policy, the automobile businesses will acquire opportunities of nearly $6 billion a year.

Nitin Gadkari stated that within this month, Vehicle Scrappage policy would be adopted after the Cabinet’s approval. The government is all set to implement the process of recycling metals. These include all the scrap materials for reducing their imports.

It is about the enhancement of the automobile industry for creating an impact with the commencement of new models in the market.

How to promote scrappage?

  • The government is making its move towards bringing a transformation in the environment and the automobile industry.
  • Offering sizable incentives
  • Development of a resale market for scrappage certification. This will be for those who are not willing to replace their scrapped vehicles with the new ones.
  • Omitting the warranty period of commercial vehicles to 10 years.
  • After Gadkari’s proposal to the finance ministry, Niti Aayog also served a proposal for 15 percent methanol that will be infused in diesel and petrol fuels. The vehicle scrappage policy is just a few days away to be finally adopted making a great blessing in disguise to the automobile industry.

An HDFC Bank has estimated on the vehicle scrappage and recycling market, that will gain nearly $6 billion, as stated above. By fiscal 2021, there will be restrictions on  9 million vehicles. And by 2025, the number will rise to 28 million, if the policy is rightly adopted.

With the commencement of BS6 compliant engines, India might end up saving 8 million tonnes of oil in a year. With the proper implementation of the scrappage policy, there will be a growth in the revenue field, reduction in costing and good savings for foreign exchange.

How will the policy be beneficial?

  • Customers will be able to acquire advantages through GST savings, discounts and scrap value.
  • On the other hand, dealers will be in demand for newer vehicles.
  • Vehicle makers will be recycling the metals acquired at a much lower rate
  • The government might save on forex due to reduced imports of poor quality metals. It could even acquire enhancement in tax revenue.

Different automobile brands like Maruti Suzuki and Mahindra have entered the recycling market. And the other leading brands are on their way. Industrial experts have stated that scrappage of the vehicles should be conducted on the usage and not on life.

The growth and development in the highways and expressways all over the metro cities could pave an enhanced pathway for the growth of the automobile industry. There will be more movement and lessened logistics cost. 

The drafted Scrappage Policy scheme states that a segment of the scrap value could be forwarded as a payback. Incentives are offered only if the purchaser is getting a new vehicle in replacement of a scrapped one. The government is trying to impose a certain set of rules for omitting the use of old vehicles.

The pressure is indeed high and could be a slow one. President of the Federation of Automobile Dealers Associations of India stated that financial incentives should be equivalent to nearly 10 percent of the new vehicle. This would further help in the popularity and success rate of the scheme proposed.

Is such a scheme effective elsewhere?

Yes, it has been. The US government’s such initiative towards scrappage policy has earned them nearly $3 billion after the global financial crisis. Reputable brands hiked nearly 30-40 per cent in their sales.

Also, the USA government presented incentives of $3500 – 4500 for scrapping old vehicles. Germany offered an incentive of nearly 2500 euros. The US programme has been a boon to acquire $900 million through enhancement in their sales. As per Knambuzz study and research on recycling and waste management on scrappage, nearly 10.7 million sales hit the market of the US, 3 months after the commencement of the programme.

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