Vehicle Scrappage Policy

Talks of vehicle scrappage policy being introduced come to the surface every few months, but unfortunately, each time policy itself doesn't come to the surface. Nitin Gadkari, Minister for Highway and Transport, has stated that it can be expected to roll out within a month. He termed the policy "very important", let's find out why?

With time, things get older and outdated. The same is for cars and technology used in cars, to reduce pollution and fuel consumption. If you live in Bangalore, you must have seen the old cars and buses emitting dirty black smoke. It is because the vehicle is too old. It causes more pollution and consumes more fuel. Now imagine having such trucks, buses, cars, and 2-wheelers on road, all over India. The country has to pay for more fuel plus damage to the environment. 

Scrappage policy fixes the maximum number of years, say 20 years, a vehicle can be driven on the road from the date of registration or sets a cut-off on the basis of emission standards, say a vehicle with Bharat Stage 3 or lower cannot operate after 2021. This ensures that high polluting and old vehicles go off-road. Vehicles getting scrapped means new vehicles will be bought. The auto-industry (which contributes 22% of manufacturing GDP) which is facing a slowdown suddenly gets this demand for new vehicles. This will give the needed boost to the employment/income in auto and auto ancillary space during these tough times. Now, auto dealers offer a discount for exchanging the scrapped vehicle for a new one, this further incentivizes buying a new vehicle. 

The metal and components in scrapped vehicles are recycled. India imports a lot of aluminum and steel. Re-cycling helps in re-using the metal already present in the country. Auto producers get cheaper raw material. India saves on the forex bill with reduced imports of metals, oil (more fuel-efficient cars on the road), and lower pollution levels.