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With over a quarter of a billion registered vehicles nationally, it is time India had a modern vehicle scrapping industry. The vehicle scrappage policy intention previewed in the Union budget speech is sensible indeed. It can well boost fuel efficiency, reduce the oil import bill and stem environmental pollution too. But, in tandem, we do need to put in place proactive policy for organised scrapping of steel, and incentivise regular vehicular maintenance to enforce pollution norms rather than go by vehicular age stipulation to have them off the roads.
A sound vehicle scrapping policy can certainly shore up demand across sectors, gainfully rev up fuel efficiency, plus have fiscal benefits in the form of reduced oil imports, and also purposefully tackle environmental externalities going forward. But the way ahead, surely, is to establish a modern organised steel scrapping segment. A recent steel ministry report did point out that while we have a large steel scrap sector with volumes over 25 million tonnes per annum, it is wholly unorganised and does not even have industry status. It clearly implies inefficient misallocation of resources when we can recycle 100% of steel and boost resource use efficiency. The way forward is to provide incentives, or, at least, remove tax discrimination. We need to incentivise investments in modern depollution zero-discharge systems. Besides, a mandatory 15- or 20-year vehicular operational life norm may be thoroughly suboptimal pan-India.
Yes, in our dense urban centres, we do need to mandate regular vehicular pollution checks, but in our vast hinterlands, actual vehicle maintenance and use matter more than mere vehicle vintage when it comes to tailpipe emissions. Better engine maintenance and better quality fuel would reduce emissions. So would better roads and traffic management. We do, of course, need to adopt Bharat Stage 6 fuel standards and even go beyond, but do so at reasonable costs and timelines and not rush the pace so as to forgo the benefit of the capital sunk into vehicles.
This piece appeared as an editorial opinion in the print edition of The Economic Times.