Finance Minister's proposed voluntary scrapping policy has received a lukewarm response from India's auto sector.

"We are separately announcing a voluntary vehicle scrapping policy, to phase out old and unfit vehicles. Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles and after 15 years in case of commercial vehicles", said the finance minister in her budget speech.

"A scrapping policy without positive incentives will remain on paper. We hope there is a deliberate incentivization of scrapping. The incentive has to be strong enough to be a tipping point for a person to replace his vehicle", said Vipin Sondhi, the Vice President of Society of Indian Automobile Manufacturers in an interview to CNBC-TV18.

India's auto sector has been asking for a comprehensive incentive-based scrapping policy for 6-7 years now. They argue that in a cost-conscious market like India a customer will not be willing to scrap his older polluting vehicle in the absence of incentives in the form of a GST, road tax and registration cost reduction.

"Fitness checks after 15 yrs for commercial vehicles is a good move. But the fact that the scrapping policy is voluntary implies that it would need incentives to drive it. We need to see the text of the proposed policy", said Deepak Jain, President of the Automotive Component Manufacturers Association.

The Ministry of Road Transport and Highways will be the nodal ministry for drafting the scrapping policy. The recent proposal to implement a green tax on personal and transport vehicles was a precursor to a comprehensive policy for recycling end of life vehicles, said a government official. The ministry had also proposed a scrapping policy for government and PSU vehicles.

Vinod Aggarwal, MD of Volvo Eicher Commercial Vehicles welcomed the government's move. "The proposed policy is a big start towards vehicle recycling", he said.

It is possible that the government may encourage people to scrap their vehicles by imposing a high green tax at the time of renewal of fitness certificate after 15 years for Commercial Vehicles and 20 years for personal vehicles. It remains to be seen whether state governments would be encouraged to use revenue collected from green tax to incentivise scrapping of old vehicles.

First Published:Feb 1, 2021 4:17 PM IST