Incentives of up to Rs1.5 lakh for scrapping old vehicles on anvil

14 Aug 2015

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Following the example of some Western countries, the Indian government could soon come out with financial incentives of up to Rs1.5 lakh for people surrendering vehicles that are over 10 years old, in order to promote the replacement of aged vehicles with new ones that have better emission standards, and to reduce traffic.

The move is aimed at supporting the automobile industry and also reducing pollution levels which have reached alarming levels in many cities, including the national capital New Delhi.

On Thursday, addressing a conference of Association of State Road Transport Undertakings, Gadkari said if the proposal gets okayed, an owner of an old car would get incentive of up to Rs30,000, which could go up to Rs60,000 for heavy commercial vehicles such as trucks.

The minister added that there would be other benefits of up to Rs 1.50 lakh but did not elaborate.

While firm estimates are not available as the details are yet to be worked out, auto industry sources said a nationwide scheme would cost at least Rs 5,000 crore."We are bringing such a scheme that if you sell your old vehicle you will get a certificate which on being produced at the time of new purchase will get you a discount of up to Rs50,000. For small vehicles like cars it will be up to Rs30,000. Besides, there will be exemptions in taxes and total benefits for big vehicles like trucks will be up to Rs1.5 lakh," Transport Minister Nitish Gadkari said on Thursday at a conference of state transport agencies.

The ministry has mandated global consultancy firm McKinsey to outline the broad contours of the scheme, and will soon approach the Finance Ministry to provide incentives to vehicles owners to ''surrender'' old, polluting vehicles to recycling agencies.

Such 'cash-for-clunkers' schemes have been introduced in some countries like the UK, the US, Germany, France and Spain for limited periods during the global recession of 2009, to drive sales in the domestic auto industry.

In the US, cash for clunkers was introduced during the recession and was an attempt to stoke growth within the economy. The scheme was structured to also incentivise the consumer to shift away from gas guzzlers.

Under the UK car scrappage scheme, a £2,000 incentive was paid to motorists who scrap cars registered before 31 August 1999 to buy a new car. The government contributed £1,000 and the remaining amount came from the dealers and manufacturers.

China substituted an estimated 2.7 million high polluters from the national car fleet by offering rebates of $450 to $900 from June 2009 to May 2010 while Indonesia launched a scrappage scheme in 2009 paying owners of vehicles at least 10 years old MR5,000 ($1,354) was shared equally by the government and auto makers.

Gadkari's plan is to set up 8-10 industrial units near ports like Kandla which will not only give certificates for accepting old vehicles but would recycle vehicles from India and abroad and thereby give a boost to employment and economy.

"We are also planning to import old cars from across the globe and recycle them near the ports. Ports like Kandla (Gujarat) have a good draft of around 20 metres. The plan is to set up eight to 10 industrial units there, which will boost employment," Gadkari said. He added that there is an urgent need to recycle as more old vehicles were running on roads with old technology that not only fall short of safety norms but also create pollution.

"We are going to recommend the scheme to the finance ministry...if incentives are given, it will be easy for people to surrender their old vehicles and get new vehicles of international specifications...may be of Euro 6 standard," he said.

"Already the National Green Tribunal has given a decision on pollution .... manufactures are now seeking time for four to five years. Manufacturers can as early as possible go to the mark of Euro 5 and 6 and I suggest if they could go for Euro 6," he said.

Also he called upon foreign manufactures to supply bio-fuel based quality buses at economical prices given the fact that India is a huge market for them.

Automobile manufacturers support a scrap policy because it raises market demand for new cars. In Delhi, the market share of diesel vehicles is about 45 percent. As most commercial vehicles are diesel powered, the segment is bound to get a boost.

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