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What does scrappage policy mean to Indian auto industry

Vehicle recycling and scrapping policy can effectively be implemented with public and private partnership. The move should also not only be seen as a stimulus to the industry but a way to help in reducing the pollution level as well as accident...

Updated: Apr 25, 2014, 08.24 AM IST
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Vehicle recycling and scrapping policy can effectively be implemented with public and private partnership. The move should also not only be seen as a stimulus to the industry but a way to help in reducing the pollution level as well as accidents, say experts.



“This (scrappage policy) should not bee seen as a stimulus package for the industry. This is going to help the people at large as it will reduce the pollution. There is a huge volume accumulation of vehicles of road which is allowed to continue, this could be a major problem. The whole idea is not one time stimulus incentive to clear the system initially but to get it going ahead. Even in a country like Germany which is well established – such incentives are necessary, because people are held back by lethargy, inertia and sometime by lack of information. In Germany for instance in 2009, the number of vehicle retired went up from 0.4 million to 1.3 million as they brought a policy for this,” said, Capt. NS Mohan Ram, Chairman, Recycling Sub-Group, Society of Automobile Manufacturers (SIAM).

SIAM recommended that in the first phase India's eight largest cities should be covered and could see as many as 8.9 million passenger vehicles and 1.47 million commercial vehicles being scrapped.

The Industry body also pitched to the government that doing this will generate Rs.31,332 crore of revenue for the government through taxes in these eight cities. Recently, the proposal attracted opposition from road transport and highways ministry which recommended that fitness test results should be the basis for phase out and not the age.

According to a report by A. T. Kearney the number of vehicles coming for recycling between 2010 -2020 will triple from three million to nine million, 80 percent of them being two-wheelers. United State also got cash for clunkers and got rid of 6.19 lakh vehicles.

He further adds “actually, it doesn’t benefit the auto industry too much, it only just pre-pones purchases. Real gain is the environment, because, old, polluting, unsafe vehicles are off the roads and new vehicles coming in. Actual benefit of the auto industry is in terms of additional sales is not significant, what significant is reduction to emission and help public.”

New Legislation

“In terms of policy, it is probably to have legislation that all vehicles should have yearly fitness regime as you find abroad. Unless the vehicle is not fit to ply on road, it should not be allowed to move on the roads in first place whether it is a commercial vehicle or a private vehicle,” said, Nitin R Gokarn, CEO, National Automotive Testing and R&D Infrastructure Project (NATRiP). He is also chairman of the government’s committee on vehicle recycling.

The criteria, in terms of what constitutes the fitness- whether it has been safety mechanism, whether it has got the emission norms because PUC mechanism today as most observers agree is not robust enough to cater to the entire emission regulation therefore the measure should not go through the current PUC system.

Improve ambient quality

Agreeing to him, Vishnu Mathur, Directory General, SIAM, said “I think there are three tiers of imperative that derives us, to look at something like fleet modernisation policy. The first is certainly the environment. Indian cities and India as whole is known to have one of the worst ambient air qualities in the world. The second is the issue of safety; I think we also have an image of being highly unsafe country in terms of road accident etc. The third is the imperative of the energy conservation. If you look at all these three factors a one time fleet modernisation policy becomes an imperative for our country which doesn’t hurt anybody else outside the country.”

Industry body SIAM has been pushing for scrapping of vehicles manufactured before 1996, saying this would enable the entry of more eco-friendly vehicles on the road.

The issue was also discussed at length at Central Motor Vehicles Rules-Technical Standing Committee (CMVR-TSC) meeting recently. Besides government representatives, even some of the non-government members of the committee did not support SIAM's scrappage proposal. They said while proposing the cut-off date, Siam had cited that pollution and emission norms came into force in India from 1996.

SIAM argues that the emission norms have been improved in the last 10 -15 years. The tendency of the Indian consumer is to continue using the vehicle far beyond its expected age. Due to which the vehicles which don’t follow any emission norms as they were manufactured way back before this norm came into force, are still running on the Indian roads and entering into Indian cities which today has BS- IV emission norms.

Similarly these old vehicles are probably not well maintained and have frequent brake failures and other problems on the road and meets with accidents at highways and roads.

Road Worthiness Certificate

SIAM has proposed tow different ageing criteria for commercial vehicles and privately owned vehicles. “Mainly from the prospective that privately owned vehicles would be better maintained that commercial vehicles. Also in terms of usage of commercial vehicle will do probably about a lakh of kilometre a year, while privately owned vehicle will do about 50 km in year.” Mathur said. It proposes 15 years for commercial vehicles while 10 years for privately owned vehicles,” said Mathur.

“Definitely, the inspection certification mechanism is the robust and ultimately the answer to most of these issues. What we are saying is that in 15 years because if a truck for example is doing one lakh km in a year then it has already done about 15 lakh kilo meter, beyond that it is impossible to keep the vehicle in good shape. So during those 15 years the IMC mechanism should operate and provide a road worthiness certificate to come on the road every year. After this 15 year, vehicle should be asked to go off-road especially if it is not meeting any emission norms today. Even if the vehicle is very well maintained” Mathur explained.


What does scrappage policy mean to Indian auto industry

Infra- limitations

“It’s a combination various things, one is to have a mechanism which is presently lacking in country. If you look at Ministry of Road Transport and Highways last five year plan, it had planned to put up ten inspection and certification centre in the country. But ten such centres will not suffice for the magnitude of the problem, just looking into through put of the number of vehicles that ply on the Indian roads. In 2010 the number was calculated about 1000 of such certifications centres across the country. Now government will not be able to fund all this. So definitely there has to be private sector participation and their capital infused into it,” said Nitin R Gokarn.

“The idea is that it is the private sector which will be setting up the scrappage units. There was a pilot project which has been executed by NATRiP to understand what kind of end of life regulation is needed to have finally environmentally friendly methods of disposal, with the help of the industry two-wheelers and four-wheelers, they have been scrapped and what is the final value of the product and how do we finally dispose off the wastage has been looked at, now the issue is we need to scale it up, we need to involve the existing player in the private sector who are efficient as far as disposal is concern, but may not be so environmentally friendly way to get into this entire act of end of life of vehicles.” He added.

Registration date

SIAM, Director General said that it would wise to take date of registration and not date of manufacturing while considering the scrappage of vehicle. Talking about multiple ownership of vehicle he added that it has to be seen that how, the incentive offered for scrapping the vehicle to go back to the initial owners
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