The changes in the proposed scrappage policy will impact the number of commercial vehicles under the policy and further control new CV demand as well, as per ICRA.
The Scrappage policy lately got in-principle consent from the PMO and waiting for GST council approval, as media release suggested.
Under the scrappage policy, previously vehicles ageing 15 years have come under the policy but now this limit is increased to 20 years. The policy changes will be effective from April 2020, at the same time of BS-IV emission norms implementation. In terms of incentives, it will get lower GST rate which is 18% and different discounts offered by OEMs.
According to Shamsher Dewan, vice president, and Sector Head, ICRA, it will regulate the new CV sales as vehicles with 20 years age will be limited. “In addition, most of these vehicles are used in rural areas and smaller towns by small fleet operators who operate used vehicles and have limited financial resources to purchase new vehicles. Moreover, around 70,000-100,000 vehicles are scrapped on an annual basis. As a result, the potential impact of the proposed policy on CV sales will be limited”.
In May 2016, Voluntary Vehicle Modernization Program (V-VMP) had been noted by the MoRTH which destined for old vehicles replacement through an incentive program. According to the draft paper, the scheme included only vehicles purchased before April 2005 and was speculated to consider all segments.
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In the draft scheme, the scrap value would be given to the owners as payback in form of a certificate, which could be used while buying a new vehicle.
