NEW DELHI: The government’s ambitious plan to replace older and polluting vehicles with newer and efficient ones is likely to face multiple challenges including incentivising owners and setting up Scrapping Centres across the country.
“Timely implementation of the Policy and incentive payout mechanism remain a key monitorable. Lack of infrastructure to handle scrapping of vehicles and recycling as per state pollution standard is a concern, which should be addressed,” said Shamsher Dewan, VP & Group Head – Corporate Sector Ratings, ICRA.
Dewan added that further clarity on valuation of scrap value of vehicle, trade ability of scrapping certificate etc. remain key for successful implementation and realising the true potential of the policy.
The government on Thursday announced details of Scrapping Policy, that includes tax incentives and direct benefit to owners.The Policy proposes to de-register commercial vehicles after 15 years and private vehicles after 20 years if they fail to pass the auto fitness test.
A senior executive at a Pune-based auto company said it would be interesting to see how owners of older vehicles would react once the policy is implemented. “The owners of such vehicles are generally not wealthy. Either they make a living out of it or they are not in a position to buy newer models. Will they be okay with a 10 per cent benefit and update to a brand new model remains a big question,” the executive said.
Meanwhile, Care Ratings in its observation said that the headwinds for implementation of the policy would be in the form of having more infrastructure in place to build organised scrapping centers, which currently India does not possess. It added, to further incentivise the consumer, there should be GST concessions on purchase of new vehicles, as tax rates in India on new automobiles are exorbitant.
ICRA estimates a total passenger vehicles population of 40.8 million, out of which about 1 million are over 20 years old. It added that, once implemented, the policy could result in about 10-12 per cent cost
benefit for new car buyers.