Car scrapping: Govt looks at financial sops for buyers

Proposed policy aims to scrap heavy vehicles that are more than 15 years old in the first phase

Road ministry would approach Committee of Secretaries to seek approval for the vehicle scrapping policy, under which the Centre plans to give financial incentives for the customers, by month end. Earlier, the ministry was considering lowering the excise duty on purchase of new vehicles by the customers ready to scrap older ones. 

But with goods and services tax coming into effect from April 2017, taxes like excise duty, octroi, customs duty are likely to be subsumed. According to a ministry official, "Tax exemption is not the only way, we can look at financial incentives for the buyers and making the policy mandatory." 

However, he did not specify the incentives the ministry was contemplating. It is currently called Voluntary Vehicle Fleet Modernisation Programme. First phase of the policy is for heavy commercial vehicles that contribute 60 per cent to the total vehicular pollution but are only 2 per cent of the total vehicles in the country. 

Road Minister Nitin Gadkari had earlier said that his ministry would soon approach the GST council and seek tax exemptions under the policy. But the same is not possible as the overall GST rate is yet to be finalised and tax exemptions cannot be ascertained before that.

The vehicle scrapping policy would offer a combined benefit of Rs 14,000 crore to the centre and states and drive the auto industry growth by 22 per cent, Gadkari had said. The proposed programme aims to scrap heavy vehicles that are more than 15 years old in the first phase. 

The draft policy had proposed to bring vehicles bought on or before March 31, 2005, numbering about 28 million, under it. 

It would lead to additional net revenue of over Rs 21,000 crore on account of additional automobile sales, besides crude oil savings of Rs 7,700 crore due to improved fuel efficiency. Once the policy is finalised, it is estimated to result in domestic steel scrap generation worth Rs 5,500 crore to substitute imported scrap.

It also has the potential to reduce vehicular emission by 25-30 per cent and save oil consumption by 3.2 billion litres a year.