Scrappage Policy Get the Green Light in Budget 2021

Finally, the most awaited vehicle scrappage policy has arrived in the 2021 Budget. After this, Private vehicles will not be able to hit the roads after 20 years and commercial vehicles after 15 years. More details of the scheme will be announced by the ministry of road transport and highways (MoRTH). 

Announcing the scheme, Finance Minister said, “A voluntary scrappage policy for vehicles to be launched, aimed at reducing vehicular pollution Vehicles to undergo a fitness test after 20 years for personal vehicles, 15 years for commercial vehicles,”. 

In her speech, Sitharaman also announced the capital investment of Rs 5.54 trillion for developing infrastructure in the country, which leads to an increase in demand for commercial vehicles. The Commercial Vehicle segment has been struggling with low sales for the past two years and this should spur the growth of the segment.

Moreover, she also introduced the scheme to augment the public transport system. For this, the government will spend Rs18,000 crore to expand the public transport in Indian cities and also buy 20,000 busses.  

To recall, last year was very disappointing for the auto sector. The auto sector had to bear the brunt of the economic downturn from 2019. After this, the corona pandemic and the lockdown make it worse. In such a situation, the auto sector also had to shut down the manufacturing unit. This directly impacted demand and supply in the auto sector. 

According to the latest data released by the Society of Indian Automobile Manufacturers (SIAM), India's automobile exports fell by 18.87 percent in 2020. The total exports of vehicles during CY 2020 (January-December) stood at 38,65,138 units as against 47,63,960 units in 2019. 

Reactions

FADA President Vinkesh Gulati said, “FADA is happy to note that the Hon’ble Finance Minister has finally announced the much awaited Scrappage Policy, though voluntary to phase out old vehicles. If we take 1990 as base year, there are approximately 37L CVs and 52L PVs eligible for voluntarily scrappage. As an estimate, 10% of CV and 5% of PV may still be plying on road. We still need to see the fine prints to access the kind of incentives which will be on offer and thus have a +ve effect on retail.

The 6,575 km Highway works proposed in Tamil Nadu, Kerala, West Bengal and Assam and another 19,500 km work for Bharat Mala project will definitely add fillip to much needed revival of Commercial Vehicles especially M&HCV segment.

The government’s reduction of customs duty on steel products to 7.5% will benefit Auto OEMs. We hence expect the benefit to trickle down to end customers thus helping in boosting of demand.

While we expected disposable income for individuals to increase with enhancement of IT slabs and depreciation benefit on vehicles for individuals, the same has not been taken into consideration.”