Voluntary Vehicle Fleet Modernisation Programme: View: Voluntary vehicle fleet modernisation programme, a good start from scrap – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-commentary/making-a-good-start-from-scrap/articleshow/85955581.cmsSynopsis

The enforcement schedules provide sufficient time to put the desired ecosystem in place. The rules for fitness test and scrapping centres are to be finalised by October 1. GoI itself will deregister and scrap all government vehicles older than 15 years from April 1, 2022.

Vinayak Chatterjee

Vinayak Chatterjee

The writer is chairman, Feedback InfraThe Voluntary Vehicle Fleet Modernisation Programme, unveiled on August 13, rests on four pillars. One, the voluntary aspect of scrapping based on vehicle fitness, and not by any enforced age-specification. Two, scrapping based on objective ‘end-of-life’ criteria to be determined by approved testing centres. Three, a recycling-cum-circular economy based on modern scrapyard facilities. Four, a system of incentives and disincentives to drive the whole exercise.

The enforcement schedules provide sufficient time to put the desired ecosystem in place. The rules for fitness test and scrapping centres are to be finalised by October 1. GoI itself will deregister and scrap all government vehicles older than 15 years from April 1, 2022. Mandatory fitness testing for heavy commercial vehicles older than 15 shall begin from April 1, 2023. All vehicles that fail the fitness test will be deregistered. Phased introduction for all other categories will commence from June 1, 2024.

The policy is expected to mobilise investment of about ₹10,000 crore through the setting up of fitness centres and scrapping yards, as well as create 35,000 new jobs. Some 10 million vehicles plying on Indian roads do not have the requisite fitness. New vehicles, which attract one of the highest rates of GST at 28%, would add significantly to the exchequer. State governments will also benefit with additional road tax collections, as well as ‘green tax’ from older vehicles.

Removal of old vehicles is projected to lead to 15-20% reduction in air pollution. All new vehicles procured in lieu of a scrapped vehicle will be Bharat Stage (BS) VI emission norms-compliant. New vehicles will also be compliant with latest safety regulations. A large number of rusting, damaged vehicles litter India’s countryside as there is no established system for scrapping. These will now get cleared up.

A major development will be the creation of a recycling ecosystem. Around 70 registered vehicle-scrapping facilities (RVSFs) will be established across the country. These could also cater to scrapping and recycling of materials from various other industries, such as electronics and consumer durables.

Some apprehensions, though, remain. A serious concern is the economic hardship that will arise to marginal owners of vehicles. Thousands of individual owner-operators typically run older vehicles in rural and semi-urban areas on thin margins. The operating scenario for them has been very challenging the last few years. Holding on to vehicles older than 15 years will become an expensive affair, as the cost for renewal of a fitness certificate may go up over 50 times for commercial vehicles and by eight times for private ones.

In addition, green and road taxes could make things truly unaffordable. By revising axle load norms, thereby allowing trucks to carry higher load, the sector’s load-carrying capacity also increased by 20%, impacting utilisation and freight rates. The rise in diesel price has added to the stress. The market for second-hand vehicles may turn extremely unattractive. The last thing owner-operators would want is an increase in borrowings. The 20% higher price of BS-VI-compliant trucks do not make things easier.

GoI expects the scrap value of a vehicle to be 4-6% of the ex-showroom price of a new vehicle. It hopes that state governments will offer rebates up to 25% and 15% on road tax for personal and commercial vehicles, respectively. It expects registration fees for purchase of new vehicles replacing scrapped ones to be waived. How enthusiastically states will cooperate is an open question, as the Motor Vehicles Act falls in the concurrent list of the Constitution.

Vehicle manufacturers are being advised to provide a discount of 5% (for which they have indicated their unwillingness). If an interest subvention scheme could be worked out with truck financiers, it would help greatly. GoI could also consider a GST reduction for purchase of a new vehicle against a scrappage certificate entitlement. The extended dates of implementation could well usher in a more conducive time.

The 450-500 automated vehicle testing stations need to be in place by the time the policy comes into play. Such stations, with multiple test lanes and instrumentation, are to be set up with investments ranging from ₹8 crore to ₹12 crore per centre. The viability of RVSFs will need to be established through the twin activities of steady availability of scrapped vehicles and offtake of recyclable materials at acceptable prices.

The Society of Indian Automobile Manufacturers (SIAM) has stated it will work with GoI to set up testing and scrapping centres. Such private-public partnerships augur well.

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