New Delhi: Road transport and highway minister Nitin Gadkari on Wednesday will make another attempt to convince finance minister Arun Jaitley to approve the Voluntary Vehicle Fleet Modernization Programme (V-VMP) in its current form. 

“Finance ministry has objected to a few provisions and not rejected the vehicle modernization programme. We’ll try to bring them on board," said Gadkari, who will meet Jaitley to discuss the policy. He declined to comment further.

Under V-VMP, the road ministry has proposed that vehicle owners scrapping their old vehicles will get monetary incentives to buy a new vehicle in three forms to aid adoption of this programme: (1) scrap value from old vehicle, (2) automobile manufacturers’ special discount and (3) partial excise duty exemption. The scheme is likely to be applicable on vehicles that were bought before 31 March 2005 or are below BS IV standards.

“The finance ministry had serious objections over a few aspects that would be the major bargaining points between the ministers tomorrow. These are number of vehicles to be scrapped, excise duty exemption, infrastructure creation for the scheme and investments along with some figure mismatches," a road ministry official said, requesting anonymity.  

The finance ministry had objected to the proposal, saying the scheme may take 28 million vehicles off the road and it would be tough to provide rebates or exemptions to such a huge number of vehicle owners. Besides, it would lead to a financial burden on the government.

“Gadkari will clarify that in the first phase, the target would be just medium and heavy vehicles which are just 1.2 million as compared to finance ministry’s estimate of 28 million. As far as revenue loss on excise duty is concerned, the minister will try to convince Jaitley, stating that with the old vehicles running on road, the revenue loss would be more. If the new vehicles are purchased, at least there would be some additional revenue for the government," the roads ministry official said.

He added that Gadkari is confident that he will resolve the issue.

The concept note of V-VMP, which was put in the public domain for comments in May, had recommended complete excise duty exemption for state transport buses to encourage public transport to shift to newer and higher capacity buses. It had also estimated generation of 11,500 crore worth of steel scrap every year.

The policy is also expected to boost sales of automobile manufacturers leading to higher production capacity utilization and it is being expected that automobile manufacturers would support the government in this initiative financially by giving special discounts to customers buying vehicles under this scheme.

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