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Car scrappage coverage: Meant advantages vs attainable actuality | Autocar India

Written by Sunny Kumar

Revealed On Mar 22, 2021 02:24:00 PM

Whereas the car scrappage coverage has proposed incentives on buy of latest autos and its registration, will the person events ship?

At one degree, no one ought to actually quibble about India’s lately introduced Car Scrappage Coverage. The intent to wash up the air is laudable and there are not any two methods about the truth that there are approach too many elderly automobiles, two-wheelers and vans nonetheless working on Indian roads. The coverage proposes numerous incentives for car scrappage together with a 5 p.c rebate on new car buy, an as much as 25 p.c low cost on street tax and a waiver of car registration payment. However will the advantages truly materialise for the ultimate shopper? We have a look.

  • Producers may hike costs to offset the proposed OEM low cost
  • There’s an assumption that states will readily scale back street tax and registration costs
  • Correct planning required to arrange scrap yards and minimise harm to the surroundings

5 p.c OEM reductions may very well be offset by worth hikes

The issue, nonetheless, lies in a number of the assumptions that will probably be a part of this initiative. Essentially the most vital of those is that producers will probably be gently nudged to present a 5 p.c low cost to these looking for to purchase new two-wheelers or automobiles after scrapping their previous autos.

“Why on earth ought to we do one thing like this?” asks a two-wheeler govt. As he explains, it’s dangerous sufficient that over the previous couple of years, his business has been on the receiving finish on levies referring to insurance coverage, security norms like ABS and the shift to BS6 which concerned loads of investments.

Because of this, costs of two-wheelers elevated progressively by greater than 25 p.c which is a “hell of some huge cash” for the section that buys bikes and scooters. It has additionally been the business’s grievance that it has been the sufferer of overregulation which has resulted in autos turning into costlier and deterring prospects from shopping for them within the course of.

“And now we’re requested to present a 5 p.c low cost to prospects as a part of the motivation train! That is wealthy!” exclaims the chief. Clearly, no producer goes to be so beneficiant and go the additional mile which merely implies that they may hike car costs as an alternative by 5 p.c. “This fashion, every part will probably be offset,” he chuckles.

The issue is {that a} additional worth hike will hardly assist the business’s trigger particularly in a price-sensitive section like two-wheelers. But, no one can query producers even when they select to behave like this just because they aren’t responsibility sure to subsidise a scrappage scheme — however, it’s the Authorities that should carry this out.

“The street to hell is paved with good intentions,” quips the chief the place the interpretation of this well-known adage is that some well-meaning initiatives may have disastrous fallouts. Certain, the scheme remains to be a few years away earlier than it’s applied however producers usually are not going to take too kindly to the truth that they are going to be a part of the subsidy mannequin.

Will States scale back street tax and registration costs?

The opposite assumption of the scrappage coverage is that States, likewise, will probably be anticipated to be as beneficiant in decreasing street tax and registration costs. Given their precarious monetary conditions particularly after Covid and the lockdowns of 2020, that is going to be simpler stated than performed. Most of them are already complaining about GST compensation not coming by way of which additionally explains why they won’t simply relent on decreasing levies on petrol and diesel.

The present worth spiral of those two auto fuels marks a flashpoint between the Centre and States the place the continual levy of excise responsibility and native taxes has led to their costs reaching report highs. Whereas petrol is nicely over Rs 90 per litre (and even Rs 100 in some areas), diesel is well beyond the Rs 80 a litre mark.

As luck would have it, politics has prevailed over economics in latest weeks with no additional hikes since February 27 because of the meeting elections due in Tamil Nadu, Kerala, West Bengal and Assam. Had this not been the case, one can safely assume that each petrol and diesel would have change into much more costly — for now, voters can’t afford to be antagonised additional particularly when inflation is hurting their family budgets massive time.

This detailed detour from the principle theme of scrappage merely places in context why States is not going to be over-enthusiastic about slashing street taxes and the likes, simply to play out their roles within the coverage. How the Centre convinces them within the interim interval will probably be fascinating to see — it isn’t going to be a stroll within the park for certain.

Establishing scrap yards in an age of scrappage

Getting a number of scrap yards throughout the nation to hold out this gargantuan process would be the different massive problem. For now, there are a handful of gamers within the personal sector and this will probably be a giant alternative for different entrepreneurs to throw their hats into the ring and get into the scrappage area.

There’s cash to be made for certain, besides that the large roadblocks may come within the type of figuring out distant areas the place the waste is not going to have an effect on the surroundings. As an business supply says, the inexperienced foyer will probably be “additional vigilant” and the Centre might want to stroll the tightrope rigorously. “You simply can’t afford to have a state of affairs the place the waste from these scrapyards impacts rivers, lakes and forests,” he provides.

It’s not as if the car scrappage coverage will not be essential. Quite the opposite, it’s completely crucial at a time when the surroundings is underneath critical menace and car emissions are additionally enjoying a task on this degradation. But, the issue right here is that the Centre is placing the cart earlier than the horse and issuing a set of diktats when the higher possibility would have been to contain stakeholders after which plan a plan of action.

To producers, it is a reminder of the time when NITI Aayog, the think-tank of the Authorities, lately determined that it was time for two-wheeler makers to desert the interior combustion engine (ICE) and embrace electrical in a ridiculous timeframe of 3-5 years. This was taking place at a time once they had invested massive bucks in BS6 (estimated at over Rs 80,000 crore) and had sufficient to fret about in an period of gradual financial progress.

Thankfully, nothing a lot got here out of the NITI Aayog brainwave and the ICE nonetheless prevails however now with this new pondering on the scrappage coverage, some business leaders fear that the ghosts of the previous have come revisiting as soon as extra.

“Disruption appears to be the motto in latest instances as seen within the diesel ban in Delhi some years again adopted by the leap from BS4 to BS6 after which the clamour for electrical,” says an official. Clearly, no one has the power any longer to react each time to such surprises.

About the author

Sunny Kumar