The long-awaited introduction of a vehicle scrappage policy was welcomed by the automobile sector — even as they await details on the incentives. However, the increase in the custom duty on auto parts has raised concerns over its resultant price increase.
“We are separately announcing a voluntary vehicle scrapping policy, to phase out old and unfit vehicles. This will help in encouraging fuel efficient, environment friendly vehicles, thereby reducing vehicular pollution and oil import bill. Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles, and after 15 years in case of commercial vehicles,” the Finance Minister said.
“We are raising customs duty on certain auto parts to 15 per cent to bring them on par with (the) general rate on auto parts,” she added.
“I am glad that the scrappage policy has been acknowledged in the Budget and expecting the policy to be announced very soon. Though the details are not yet out, when the policy comes out, it should have full incentives for scrapping and not just disincentivise for not scrapping,” said Pawan Goenka, MD and CEO, Mahindra & Mahindra.
“We await further details of the policy, as the industry had requested an incentive-based scrappage policy for it to be effective,” said Vipin Sondhi, MD & CEO, Ashok Leyland.
Goenka said that it was the right direction to not make the scrappage policy mandatory. “Practically, it is not possible to make it mandatory right now because people who own 15-20-year-old vehicles are people with low income, whether it’s for personal use or commercial use. For these people, to force them to scrap the means of their livelihood will be very unfair.”
However, Hetal Gandhi, Director, Crisil Research said the scrappage policy is to remain a non-event given the voluntary nature of its implementation without incentives. “This would therefore not aid commercial vehicle demand as incentives over ₹1 lakh would be needed for transporters to scrap their 15 year and older commercial vehicle.”
The Society of Indian Automobile Manufacturers (SIAM) said that while it awaits the details of the vehicle scrappage scheme, it requests that fitness testing and certification be done much earlier and at frequent intervals to ensure safety, environment friendliness and fuel saving.
Local making push
While certain industry bodies like Automotive Tyre Manufacturers’ Association (ATMA) and Automotive Component Manufacturers Association of India (ACMA) and companies welcomed the increase in custom duty on auto parts, saying it would encourage local manufacturing, some automakers and analysts expressed concern.
SIAM also said: “The increase in customs duty on auto parts/lithium-ion cell parts is of concern and is likely to increase cost of manufacturing automobiles, wherever indigenisation is yet to happen.”