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Passed up opportunity?

The scrappage policy is indeed a positive step forward but misses out on certain key links

Passed up opportunity?
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The much-awaited draft policy on vehicle scrappage is finally out. It outlines the criteria for defining and scrapping end-of-life vehicles and also makes provisions for the safe disposal of waste and material recovery.

But the draft policy also misses an opportunity of designing an effective stimulus programme for green recovery in the sector to achieve air quality benefits.

There is no stated commitment in the policy towards fiscal stimulus for renewal of ageing vehicles with BS-VI norms or linking with the electrification of vehicles. It places the onus of incentivising vehicle scrapping on state governments.

The proposal

The proposed policy seeks to phase out unfit vehicles to reduce vehicular pollution, meet the climate commitments, improve road safety and fuel efficiency, formalise the informal vehicle scrapping industry, and recover low-cost material for the automotive, steel and electronics industry.

It has advised state governments to waive off 25 per cent road tax for personal vehicles and 15 per cent for commercial vehicles along with the registration fees.

Manufacturers have also been advised to provide a five per cent discount on the purchase of new vehicles.

The Road Transport and Highways Ministry will help set up registered vehicle scrapping facilities including through public-private participation and ensure compliance with environmental regulations for safe disposal of waste.

The central government will also support a network of automotive fitness centres with adequate test-only lanes, information technology servers and other facilities to encourage private investments. These centres will help identify unfit and end-of-life vehicles.

The draft policy requires the rules for fitness tests and scrapping to be in place by October 1, 2021. All government and PSU-owned vehicles older than 15 years will be scrapped by October 1, 2022. There will be mandatory fitness testing for heavy-duty vehicles by October 2023; the same will be done for other vehicles by October 1, 2024.

Reportedly, scrapping centres will keep records and verify ownership of vehicles based on the VAHAN database. Vehicles damaged in fire, riots or any devastation, declared as defective by manufacturers, and those confiscated by enforcement agencies will have to be scrapped.

The missing links

The draft policy is indeed a positive step but its focus on targeted fleet renewal for maximum emissions gains is still weak.

The proposed policy puts the entire onus of incentivising fleet renewal on the state governments. They have been advised to waive off a big chunk of road tax and registration fees on replacement vehicles. These are important sources of state revenue, and the reaction of the state governments is still not known.

The more compelling question is whether the Central Government would consider Centre-supported stimulus programmes for post-pandemic green recovery. This is the global trend wherein governments have been giving conditional bailouts or tax supports linked to emissions targets.

More effective leveraging of the policy is possible if the Government allows GST cuts for replacement vehicles including electric ones, and considers direct incentives for targeted fleet renewal of most polluting old trucks and buses based on BS6 standards.

An old BS1 (Bharat Stage Emission Standard) truck was originally designed to emit particulates 36 times higher compared to a BS6 truck.

For such a targeted programme for heavy-duty vehicles, the policy can take a more nuanced approach. Consider that some truck owners may want to only dispose of the very old trucks while others may want to scrap and replace the older trucks.

In that case, a rebate can be given to the owners of end-of-life vehicles who are interested in 'only scrapping' the vehicle without immediately replacing them. And this rebate can be given based on a scrappage certificate from authorized scrappage centres.

But higher incentives can be given for 'scrappage and replacement' of end-of-life vehicles with BS6 compliant vehicles. In this case, the vehicle dealer/manufacturer may also give matching incentives. The thumb rule could be to reduce the overall cost of the new replacement vehicle meeting BS6 standards by up to 15 per cent.

Old trucks with more economic life left can get a comparatively higher incentive as that will give higher emissions benefits.

The strategy, however, can be different for older personal vehicles — cars and two-wheelers. For these vehicles, the Central incentive can be linked with replacement with electric vehicles. This can be added to the normal scrapping of end-of-life vehicles as already proposed in the draft policy.

The reason is simple — Personal vehicles are numerous and generic public support for their fleet renewal can divert a lion's share of the allocated budget from the priority heavy-duty segment. Therefore, the public support for the personal vehicle segment can be linked only with voluntary electrification which will accelerate the attainment of a 30-40 per cent electrification target by 2030.

Manufacturers' responsibility for recyclability

The new policy also needs to align with the mandate for the manufacturers to meet targets of recyclability of material.

It is encouraging that the Automotive Industrial Standard-129 on reuse, recycling and material recovery from vehicles was framed in 2015. This requires 80-85 per cent of the material used in vehicle manufacturing by mass to be recoverable/recyclable /reusable at the end of life.

AIS-129 also restricts the use of heavy metals including lead, mercury, cadmium, hexavalent chromium, etc, and asks for the coding of plastics to inform dismantlers.

This should be mandated in the scrappage policy, at the same time including goods vehicles or the N1 category. Further, the requirement of recyclability should be extended to 85-95 per cent

It is also important to align with European regulations to include extended producer responsibility to make vehicle manufacturers responsible for their own waste.

More to do

Clearly, this first-ever formal scrappage policy in India is urgently needed to help build infrastructure for safe disposal and material recovery to minimise environmental hazards.

But India would be adopting scrappage policy during these unprecedented pandemic times, so it is necessary to leverage this targeted fleet renewal with well-designed Central support for a post-pandemic green deal.

Views expressed are personal

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