Ineffective nudge – The Hindu BusinessLine

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The sketchy scrappage policy may neither promote replacement nor spur the economy

A scrappage policy to take polluting vehicles off the roads and revive India’s automotive sector has been a much-anticipated feature of India Inc’s Budget wish-lists for five years now. But after multiple rounds of consultation, it is disappointing to see the Ministry of Road Transport flag off a watered-down scheme with rather sketchy contours this week. The original scheme, conceived in 2016 and tweaked in 2018 and 2019, envisaged providing positive incentives, in the form of excise duty cuts and price discounts to owners who decided to replace their clunkers with less-polluting alternatives. Ambitious plans were then mooted on transforming India into a global recycling hub, so that auto waste could be efficiently recycled to reduce costs for local industry. But after a repeated shifting of goalposts, the latest proposal makes no mention of incentives at all. It instead suggests that States levy a ‘green tax’ layered on to the existing road tax, on owners of older vehicles to promote scrappage.

By the Ministry’s admission, it is commercial vehicles of over 20-year vintage, making up about 1 per cent of the fleet size, that account for much of India’s vehicular pollution. There’s no reason why a cash-for-clunkers scheme relying on incentives cannot be rolled out for this segment alone.

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