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Photo: Mint

Scheme to scrap old vehicles likely in budget: Vijay Chhibber

The ruling aims to get old, polluting vehicles off the road, in an attempt to combat emissions and air pollution

In an attempt to combat car exhaust emissions, the Union budget may propose India’s first vehicle-scrapping policy to get old, polluting vehicles off the country’s roads, a former senior official said.

“That thought has been shared with the finance ministry. There is a possibility that it may get considered for the budget. It will pave the way for this policy to come up," said Vijay Chhibber, who retired as secretary, ministry of road transport and highways, on 31 December.

The government may want to start implementing the plan, which will entail setting up a large number of vehicle-dismantling units, as early as July 2016, Chhibber said in a phone interview on 28 December.

The plan comes amid growing concern over vehicular emissions polluting the nation’s air and adding to its respiratory disease burden.

From 1 January, the Delhi government started implementing a policy of allowing cars with odd- and even-number licence plates to ply on alternate days, in a 15-day experiment.

Delhi’s air has been ranked the world’s dirtiest by the World Health Organization.

Schemes to scrap old cars have been rolled out in the past by the governments of the US, Japan, and in Europe. Most such schemes operate for a limited period, and are aimed at boosting the sales of new, fuel-efficient cars.

In India, too, the scheme may help replace old vehicles with higher emissions, lower fuel efficiencies and lower safety standards with more modern counterparts.

Chhibber declined to give details, but said the initial consideration is to phase out all vehicles under commercial usage older than 15 years, including cars, buses, trucks and three-wheelers.

His comments follow a high-level meeting on 8 December that proposed to allow MSTC Ltd, a company under the ministry of steel, to set up 100 vehicle-crushing units across the country. The meeting was attended by representatives from the ministries of finance, steel and heavy industries and MSTC Ltd.

According to a presentation made at the meeting, which Mint has reviewed, as many as 59.16 million vehicles are proposed to be scrapped.

The total amount required to be spent in the form of financial incentives to the vehicle owners is estimated at 83,772 crore, according to the presentation cited earlier.

Chhibber declined to comment on these numbers.

“We don’t have the number. We are trying to assess the number," Chhibber said. “Our inspection regime is so inadequate that we do not get a right idea about the road worthiness of a vehicle."

Chhibber said the government may provide incentives in the range of 1,200-25,000 per tonne of scrapped steel, “which will be better than what a kabaadiwala (scrap dealer) gives you".

Such incentives could be adjusted against the excise duty that a customer will pay on purchase of a new vehicle.

Given the financial implications of the scheme, the finance ministry will have to sign off on it.

Each new vehicle purchased against a scrapped vehicle, for which financial incentives will be offered to its owner, will generate tax revenue for the government, said an auto industry executive requesting anonymity.

This additional revenue will be generated in the form of three different taxes—excise duty, sales tax and road tax—that are now levied by the central and state governments, the executive said.

The Indian automobile industry has received flak from critics over high levels of vehicular pollution. The Supreme Court recently joined the battle against air pollution in Delhi and slapped a ban on the sale of high-end diesel passenger vehicles till 31 March, made it mandatory for taxis to shift to compressed natural gas, doubled the levy on trucks entering the city and took 10-year-old commercial vehicles powered by diesel off the city’s roads.

While it is not clear whether the actions ordered by the apex court will be enough to fix the air quality in the capital, the measures are a setback for the automobile industry.

Concerns have also been expressed over the fact that the Delhi government’s odd-even plan exempts two-wheelers and vehicles driven by women who are accompanied by another female passenger or boys aged 12 years or less.

“With many exemptions and inadequate public transport system, the success of road space rationing policy largely depends upon all stakeholders supporting (it) and how this policy gets implemented," said Abdul Majeed, partner and auto practice leader at PricewaterhouseCoopers.

According to Vinay Raghunath, partner (automotive practice), EY India, the growing concern around air quality is expected to put greater pressure on automakers to focus more on reducing emissions and could lead to earlier-than-scheduled introduction of stricter emission standards. “Automakers will have to factor in newer uncertainties in their product planning, given the upcoming regulations that are aimed at addressing the concerns around congestion and air pollution in select markets," Raghunath said.

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