Incentives for vehicle scrappage need to be better

The vehicle scrappage policy, or the Voluntary Vehicle Modernisation Program (VVMP), has been a slow starter. After having been first proposed by the Road Transport and Highways Minister Nitin Gadkari in August 2015, the VVMP was launched last week. Automakers have agreed to provide discounts on purchase of a new vehicle against a scrapped one, with the concessions ranging from 1.25-3 per cent of the ex-showroom price for commercial vehicles (CVs) and 1.5 per cent of the ex-showroom price or ₹20,000, whichever is less, for passenger vehicles. While the implementation is a good beginning, there is scope for improvement.

In the nine years since it was mooted, the policy has seen three iterations. The original proposal put out in May 2016 said that vehicles (predominantly trucks) bought prior to March 31, 2005 (i.e., those older than 10 years then), or those below BS IV emission standards, would be eligible for scrappage incentives. This was diluted in 2018 by increasing the age of the vehicle to 20 years. The implementation date — set to 2020 then — didn’t see light of day until the subject came up again in Budget 2021, where instead of age, vehicle fitness was replaced as the key criteria for mandatory scrapping.

Cut to 2024, formalisation of the scrapping infrastructure is gaining ground. Data from Parivahan Sewa of the Ministry of Road Transport and Highways shows that 117 registered scrapping facilities which follow technologically advanced and environmentally safe processes as mandated by the government are now available, with 63 of them being operational across 17 States and UTs. About 45,000 applications for scrapping private vehicles have been received against which 35,000 have been scrapped as on date. With automated fitness tests becoming mandatory from October 1, 2024, onwards for CVs and PVs crossing a certain age, the launch of the VVMP hasn’t come a day too soon. Vehicles which fail the test become eligible for scrapping. However, more clarity is needed on the status of the existing fitness testing infrastructure.

For a policy that is predominantly voluntary, the carrots could’ve been better. There was mention of excise duty (later GST) concessions on the new vehicle bought in exchange, in the earlier versions of the policy. The latest one is silent on this aspect. Automakers too may have done too little. The 2021 scheme spoke of a 5 per cent discount by OEMs which has now been cut sharply, with caveats that it would be applicable only on select models, and for one or two years. The scheme can look at higher concessions for EVs. But lack of proper infrastructure for scrappage of EV batteries could do more harm than good to the environment. Getting old vehicles off the road now is a good start. But for the long-term, the government should adopt a more integrated approach towards meeting the broader goal of reducing vehicular emissions, rather than a piecemeal one.