The scrappage policy |

The scrappage policy has turned real after being in news for a long time.

Story by Bhushan Mhapralkar

Turning real after being in the news for a long time, the voluntary scrappage policy is expected to have a deep and long-standing effect on the Indian automotive industry. If it is positive or negative would be a matter of debate, or too early, the fact is, the effect of the policy would be long and deep. With the devil in the details, the scrappage policy is certain to have an effect on the transport industry involving CVs as well. Announced by transport minister Nitin Gadkari, the scrappage policy, though voluntary, does carry measures to de-incentivise CV owners to scrap their vehicles after 15 years. A vehicle owner, which is very likely to the serial number two, three or four on the registration certificate, will have to re-register his vehicle are 15 years for a period of five years by paying a hefty registration fee as compared to what the new vehicle owner paid. He will also have to pay a hefty penalty for delay in re-registration, and a ‘green tax’. Regular price escalation with every model change or at the start of every calendar year, or with every new regulation, is not unusual. If, the then price of a new vehicle were to be considered to re-register a new CV, the costs would be much higher than the ROI a vehicle owner would expect. And, beyond that is the ‘green tax’ element for five years.

Mentioned an industry source that the vehicle scrappage policy is more likely to wipe out a considerable chunk of transporters – small and medium, rather than to achieve its intended target of lower pollution or higher vehicles sales. There are instances when vehicles manufactured in 2015 and 2017 have failed to pass the ‘PUC’ test because of lack of maintenance, bad fuel quality and a malfunction in the powertrain or its allied system, he added. Questioning the study behind the policy framework, another source stated that the much likely effect would be to wipe out a chunk of businesses contributing to the economy rather than reducing pollution as much. A one size fits all policy approach towards autos will be highly destructive and despite the five-per cent rebate against regularly escalating vehicle prices, he added. Pointing at driver-operators in Europe, he mentioned that this move reminds him of the new
axle norms of 2018 and their effect.

Stating that the lack of demand and lower freight rates aren’t helpful, and the call for higher operating costs in the form of new trucks, however efficient they may be, just does not make a compelling business case for a large chunk of transporters in the country. A six-truck owner transporter from Hubli, on the condition of not revealing his name said that he does not intend to buy new CVs and would exit the business over time. He explained that his business needs call for buying a truck that is priced between Rs.45 and Rs.50 lakh, which he cannot afford. In such a situation, he added, it would be prudent to shut down the business. Said a small transporter from Kolhapur that three of his four trucks are over 15 years of age and ply short distances. They often do work for government organisations and clients that he has gathered over 40 years. I maintain my trucks well. They undergo ‘PUC’ test from time to time. The scrappage policy risks to ruin all the hard work and dedication towards my business in one swipe. I cannot afford new trucks and would be left with no other option but to shut down my business and send home my trusted set of drivers and employees.

Mentioned a local transport organisation representative on the condition of not mentioning his name that freight rates are not good enough to be able to afford new CVs. For a new truck, an EMI of between Rs.40000 and Rs.50000 is simply not feasible in the current situation. With small and medium transporters said to be struggling to survive in the wake of lower demand and high compliance costs, as a disincentive measure for CVs over 15 years of age under the guise that they are more polluting than the newer and stricter emission standards complying vehicles, the scrappage policy, claim sources, includes much higher fees for fitness certificate and fitness test. While draft notifications, in the next few weeks, will be published and be in the public domain for a period of 30 days to solicit comments and views of all involved stakeholders, sources mention that vehicles aged 20 years should be considered.
Said the local transport organisation representative that the scrappage policy should cover vehicles that are aged 20 years and above and reduce it gradually. Though the exact number of CVs aged over 15 years is not known, they are claimed to amount to between 28 and 30 per cent of the total CV parc in the country. Of the opinion that BSVI has been very unkind to transporters, an industry source stated that the ability of transporters to afford new trucks has depleted further. Especially, those that are involved in cargo segments. Tippers, he said, are subject to fixed-term infrastructure projects and contracts. Drawing attention to the fact that small operators will not get the input credit for GST, the local transport organisation representative expressed that the scrappage policy is likely to do more harm to the nation’s economy than to hand hold transporters across lines to move up the ladder. The expectation, it seems, is to get only the bigger businesses to contribute to the nation’s economy. Interestingly, the scrapping of government and PSU vehicles which are older than 15 years are to come into effect from April 1, 2022. In case of private vehicles, the rules for fitness tests and scrapping centres are to be applicable from October 01, 2021. The mandatory fitness testing for heavy CVs is to come in force from April 01, 2023. The same will be put in place in a phased manner for other categories from June 01, 2024.