Stakeholders raise concerns on the new vehicle scrapping policy

By Rohin KumaronMay. 16, 2021inEconomics and Technologies
  • India’s first formal vehicle scrappage policy focuses on the replacement of old and unfit commercial and personal vehicles and aims to reduce pollution, improve road and vehicle safety, better fuel efficiency and boost the auto industry.
  • The Union Minister termed the policy as a “win-win” proposal for all. However, the industry, transport associations and vehicle owners have raised their concerns.
  • Vehicle scrappage policy globally has been an initiative to boost the shrinking economy. Many countries globally had adopted such policies to fight the global financial crisis of 2008.

The new vehicle scrappage policy announced by Nitin Gadkari, Road Transport and Highways Minister on March 18, has left Zafar Miyan clueless. Zafar owns two trucks both little more than a decade old which ply short distances. His biggest worry is the government’s uniform guideline of dismantling commercial vehicles more than 15 years old. “On average, I spend around Rs. 20,000 on a truck’s maintenance every year. Both the trucks are well maintained and have proper fitness certificates. I don’t intend to get my vehicle scrapped and buy a new one in the next few years. And, why should I do it if it’s well maintained? Just because it has crossed 15 years? I don’t get this logic,” Zafar argues.

Zafar’s concerns resonate with the 2016 study by the Central Pollution Control Board (CPCB) and GIZ (a German development company) that observed, “Vehicle obsolescence is not just influenced by the age of the vehicle, but varies based on geographical area of operation, the driver, the nature of the parts used and replaced, and the rate of maintenance of the vehicle.”

India’s first formal vehicle scrappage policy focuses on the replacement of old and unfit commercial and personal vehicles and aims to reduce pollution, improve road and vehicle safety, better fuel efficiency and boost the auto industry. The Union Minister termed the policy as a “win-win” proposal for all. However, the industry, transport associations and vehicle owners have raised their concerns.

The All India Confederation of Goods Vehicle Owner’s Association (AICGVOA) and Kerala Lorry Owner’s Federation (LOF) has approached the Transport Ministry calling the recommendations of the policy as “not practical.” According to media reports, AICGVOA and LOF have said that around 50% of the goods carriers in India would be required to be dismantled if the government proceeds with the new policy. They also asserted that scrappage will never be a practical option for thousands of vehicle owners.

Need for massive infrastructure

The winnability of the policy hinges on the auto sector or prospective investors who would be required to set up ample number of Automated Fitness Centres and scrapyards to create a suitable environment for scrapping. The fitness centres will keep records of fitness of vehicles, the criteria of which includes emission test, braking test and checking of safety components as per the Central Motor Vehicles Rules, 1989. The government aims at least 718 such fitness centres to be set up in the country, with the target of one in each district. The Ministry of Road Transport and Highway also plans to promote the model inspection and certification worth Rs 170 million in all states. It is reported that the ministry has already sanctioned 26 such model centres. The centre has requested the state governments to provide land for free to these fitness centres. The states haven’t reacted to it yet.

Apart from the fitness centres, a large number of scrap yards would be required across the country to carry out this gargantuan task. Identifying locations and obtaining green clearances for these scrapyards will be another challenging task.

CERO’s recycling centre in Greater Noida. Photo from CERO.

CERO (Mahindra MSTC Recycling Pvt. Ltd.), a collaboration between Mahindra Accelo and MSTC (a government of India enterprise) is currently India’s only authorised recycler for motor vehicles. It has its recycling centres at Delhi-NCR, Pune and Chennai and additionally, collection centres in Jaipur, Ahmedabad, Bengaluru, Chandigarh, Mumbai and Hyderabad.

Commenting on the requirement for infrastructure, an official from CERO in an email response to Mongabay-India said, “Most of the vehicle scrappers are unorganised and do not have proper equipment or processes to recycle vehicles. The government’s vehicle scrappage policy is a welcome move however, finer points of the policy are yet to be finalised. This policy, if enforced properly, will help in organising the recycling industry. It will set a clear process of recycling vehicles in the right manner without harming the environment. So that infrastructure will be readied as soon as a favourable policy is announced.”

Environmental challenges

While announcing centre’s new scrapping policy, the union minister said that the move is also aimed at reducing emissions. It’s an understanding that older vehicles (above 15 to 20 years) cause 10-12 times more pollution than the newer ones.

The demand for taking older vehicles off-road has been one of the prominent demands by clean air campaigners. However, many say that the scrappage policy alone cannot serve that purpose. A lot of other policy initiatives need to go hand in hand.

The @MORTHIndia introducing the Voluntary Vehicle-Fleet Modernization Program or ‘Vehicle Scrapping Policy’ which is aimed at creating an Eco-System for phasing out of Unfit and Polluting Vehicles.

— Nitin Gadkari (@nitin_gadkari) March 18, 2021

“There are already existing good policies intended to reduce and control emissions but their implementation remains unachieved. If the environment really is the concern, pending and improper execution of existing environmental policies should come first. In the given context, the announcement of New Scrappage Policy which claims to be aimed at reducing pollution seems to be nothing more than a media event,” said Ravi Shekhar, an environment activist.

Sceptical of how the scrappage policy would play on ground, Shekhar said, “The National Clean Air Action Plan (NCAP) shows that about 50% of the air pollution generation in India is due to poor transportation system. It is imperative to look at public transport as the first point of intervention.”

He also points towards the inefficiency of urban systems in managing growing e-waste. “Now we will have a ‘new kind’ of garbage in the form of scrap that can’t be recycled and reused. The government needs to develop robust execution plan to avoid failure of the policy,” added Shekhar.

“CERO uses modern equipment to recycle vehicles. This ensures that no harmful pollutants are led back to the environment. All harmful fluids are collected properly and sent to government-approved recyclers. Post that, the vehicle is dismantled and all its components are separated. The major part is steel which is sent back to the furnaces for remelting and reuse. Other parts such as plastics, aluminium, copper, etc. are also recycled via authorised recyclers,” said a CERO official in an email response.

Attempt to save the shrinking economy

Vehicle scrappage policy, globally, has been an initiative to boost the shrinking economy. Many countries globally had adopted such policies to fight the global financial crisis of 2008. Perhaps, the Indian government’s move is also a leaf out of the same playbook. But is India ready for it?

According to the data provided by the Union Minister in Lok Sabha, India has 51 lakh  (5.1 million) light motor vehicles that are more than 20 years old and 34 lakh (3.4) over 15 years old. Around 17 lakh medium and heavy commercial vehicles are older than 15 years without valid fitness certificates.

The proposal “advises” the state governments to give a 15% road tax rebate for commercial vehicles and 25% for personal vehicles including the registration fees. Those opting for the scheme can also avail 5% discount to be offered by the manufacturer against the scrapping certificate and also a waiver can be availed in form registration fees.

Local scrapyard in Gaya, Bihar. Photo by Rohin Kumar.

The auto industry has expressed its displeasure over incentivisation being forced on the industry. A TATA motors sales executive, on the conditions of anonymity, said, “Economic slowdown and many of the measures taken by the government earlier has impacted the auto sector badly. The companies have already made huge investments in transitioning from BS-IV to BS-VI last year. It is really hard to think of incentives from the manufacturers given the present situation. If the government pressurises, the companies will hike the vehicle prices, which in any way will not help the industry. At this point in time, the government needs to provide incentives for incremental vehicle sale.”

On the other hand, the centre’s “advice” might also pose a tussle with state governments as road taxes are a major part of revenue and states also might argue for GST cuts for overall cost reduction for replacement.

(With inputs from Nishant Saini, research scholar at Tata Institute of Social Sciences)

First published by Mongabay India on 29 Mar. 2021

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