Scrappage Policy Is A Boon For New Cars

Kudos to the Union Minister for Road Transport and Highways – Nitin Gadkari for approving the policy of scrapping of government department and PSU vehicles older than 15-years and making way for cheaper new cars and a better green environment. 

To be effective from 01 April 2022, this new scrapping off policy will not only reduce pollution caused by over-used vehicles but will also help in recycling machines like shredders to be re-used post reducing them to small parts, will help the buyer with a compensation amount that may be equal or more to the resale value of such vehicles and will definitely boost the demand for new vehicles at a reasonably reduced price. Reports suggest that carmakers have agreed to a proposal of offering a 1 per cent discount to new buyers.

While other countries including the USA had previously undertaken measures similar to the scrappage policy and implemented in the aftermath of the 2008-2009 financial slump; India took it now but is finally on the same roadmap of benefiting the old vehicle owners and of course the new ones. Some studies in the US have shown that while the compensation for old vehicles added a burden of $3 billion on the US taxpayer, people getting compensated often went for cars that were smaller and/or less expensive. A Texas A&M University study, for instance, found that people who opted for Cash for Clunkers (the scrappage policy of the US) bought cars that were $4,600 cheaper on average than cars they may have bought otherwise. Others, however, argue that the same people would not have made new purchases at all if it was not for this program.

Speaking of India, a well-defined vehicle scrappage policy in the country can help create an industry of its own with a business opportunity of $6 billion (Rs 43,000 crore) a year, according to an ET report. On a local level too, the policy will have a major impact as it would help source large tons of steel locally if old vehicles are recycled. If we go by the reports of the HDFC Bank, the steel industry imports about 6 million tons of steel scrap annually and apart from the $6 billion steel scrappage potential, there is an additional business that can be generated from the recycling of plastic and rubber and other body parts in the country thereby opening up avenues for more employment and reduction of costs. The study also defines that 28 million vehicles could go off roads by 2025, largely comprising two-wheelers and that it would reduce carbon dioxide emission by 17 per cent and cut particulate matter in the air by 24 per cent.

Other benefits of this much-needed scrappage policy include improved safety, lower oil imports due to greater fuel efficiency of current vehicles, infused investment, fewer costs as more and more materials will be reused, and enhanced job opportunities. Moreover, it is time we bid adieu to rickety, smoke-spewing vehicles on the road and say hello to the policy!

The author is Founder and MD at Big Boy Toyz

DISCLAIMER: Views expressed are the authors' own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.