The success of any policy is measured by how much it resonates with various countries around the world, and hence it can be concluded that the automobile scrappage policy has been an overall success. In the reverberation of the 2008 global financial crisis, more than 18 countries implemented scrappage policy to combat the economic slowdown.
As the Narendra Modi government squares up this scheme's potential, it has realised the impending probability of a well-implemented scrappage policy. A well-executed policy will boost demand for motor vehicles and benefit in creating job opportunities and assuage the consumption and demand slowdown across different demographics. The aim was two-branched — to boost sales in the motor industry and to tackle emissions.
The Scrappage Policy around the world
In the US, the programme was called "cash for clunkers" and offered people between $2,500 and $4,500 to scrap older vehicles that gave mileage up to 7.7 km per litre. The programme ran for eight weeks.
The UK came up with an enticing scheme which gave car owners up to £2,000 for scrapping an old car and buying a new, more efficient one (co-funded by the government and the car industry) if they scrapped their old cars. However, the scheme was valid only if the individual bought a more fuel-efficient vehicle.
In China, there have been two rounds of an incentive-based policy to get polluting cars off the roads. In 2011, the city started a scheme to target cars registered in or before 1995. Residents were paid between $350 and $2,300 to scrap these vehicles. In 2014, the administration brought in the second policy that called for the scrapping of 'yellow label' cars. These cars did not meet the emissions and fuel standards of China.
On February 1, 2021, Finance Minister Nirmala Sitharaman declared a vehicle scrapping policy pushing the Nifty auto index 1% higher. She announced this while introducing the 2021 Budget of the country. While not giving out most details, Ms Sitharaman said that the new policy would eliminate old and unfit vehicles in the Indian market. The government intends to test-drive the policy by making it a voluntary endeavour at first, before making it mandatory. So what exactly does this policy entail?
The policy would mean that the vehicles would have to opt for a fitness test in the automated fitness centres after 20 years for private vehicles and after 15 years of commercial vehicles use.
A fitness test will be piloted at automated fitness centres, determining whether the vehicle will be qualified to function on roads, or whether it should be headed to the scrap.
The new vehicle scrappage policy is assessed to increase the INR 43,000 crore business opportunity by boosting the auto industry's utilization. The new policy will likewise help the environment as it will diminish vehicle contamination.
According to Sitharaman, the Ministry will announce the voluntary vehicle scrapping policy's details to eliminate old and unsuitable vehicles. It will urge individuals to eliminate old vehicles and purchase newer eco-friendly and harmless to ecosystem vehicles.
The new policy will permit customers to go for voluntary scrappage of old vehicles. The goal is to take out the old and polluting vehicles off the streets and send them to the scrappage yard to make these vehicles' ideal. Vehicles older than 15 years will have a decreased resale worth, and they are probably going to pollute and degrade the environment a lot more than the current new vehicles. Therefore, deliberately rejecting them will permit the scrapyard owners to recover the parts and bring in cash. The owners of vehicles will likewise get financial assistance to purchase another vehicle.
It will encourage the demand for new vehicles and boost the auto enterprises, one of India's primary businesses. The vehicles' scrapping will likewise guarantee that the metal and other recyclable parts are appropriately removed from the vehicle. It will help the environment too since these parts can be reused to make various things and can likewise be utilized to make new vehicles.
There are certain concerns relating to the policy over the definition of the life or age of a vehicle, that may result in an economic loss for the vehicle owner due to scrapping of the vehicle.
This concern mainly relies on the fact that India may face the same fate as the US. After the US implemented the Cash for Clunkers scheme to provide financial incentives to car owners, even after spending $3 billion, it failed to stimulate the kind of growth that was anticipated.
The new policy will be applicable from April 1, 2022, and the Ministry of Road Transport and Highways has declared the same in a declaration. When the policy occurs, India is relied upon to turn into a manufacturing centre for automobile brands worldwide in the coming years. The Ministry will share the details of this scrappage policy and other data in the coming days or weeks. Since it is a significant automobile policy, there will probably be a different meeting to address the same.
In India, vehicles are registered for fifteen years, and in Delhi-NCR, diesel vehicles are registered for ten years. On the off chance that the owners wish to keep the vehicle for an extended period, they would be required to pay-out through Green Tax. The green tax relies upon the urban areas' pollution, and it will be lower in the less contaminated urban areas.