The Old Vehicle Scrap policy got a push on Feb 7 after Minister of Road Transport, Shipping and Highways Nitin Gadkari sent it to the Cabinet for approval.
Once the policy gets the approval, it will be sent to the GST council.
Commercial and transport vehicles that are over 15-years-old will be certified unfit for the road. If the policy is implemented, nearly 28 million vehicles will be scrapped.
Gadkari said that PMO is enthusiastic about the proposal as it would put an end to pollution caused by old heavy vehicles.
The policy file was lying on Finance Minister Arun Jaitley’s desk for nearly two years due to prolonged deliberations on GST provisions between Centre and states.
Under the Voluntary Vehicle Fleet Modernisation Programme (V-VMP), the policy’s official name, old vehicle owners will get a relief of about Rs. 5 lakh if they purchase a vehicle costing over Rs. 15 lakh.
“We propose a discount of about Rs. 2 lakh from manufacturers at the time of purchase while about Rs. 2.5 lakh concession in taxes by state and central governments for those purchasing new commercial vehicle on surrender of old vehicle. Tax concession would be as recommended by the GST Council,” said Gadkari.
If the policy is implemented, tax revenue from the automobile sector would increase by Rs. 10,000 Crore. The industry turnover would quadruple to 20 lakh crore from 4.5 crore.
Ministry of Steel Trading Company (MSTC) recycling units would be set up under the government’s Sagarmala project. Sagarmala project is a port-led development program introduced to equip India’s coastline and enable it to contribute to growth. The policy would benefit an automobile-intensive trade port like Chennai.
The policy would cut harmful emissions, increase sales for automobile manufacturers, improve overall fuel efficiency in the economy, reduce the import of oil, multiply government revenue through taxes levied on purchase of new vehicles, and reduce the dependence on steel imports as the old metal would be melted for recasting.
The resistance to this policy comes from pensioners, medium-income and cash-strapped owners who wish to maintain the vehicle and refuse to replace their old car with a new one by spending saved up cash or by taking a loan.
Exchange schemes run by automobile companies and the argument that purchasing a new vehicle would offset the maintenance cost doesn’t beat the significant at-a-time investment the buyer would have to make.
Commercial vehicles bought on or before March 31, 2005 would be scrapped, according to the draft policy.