I conceive , I conceive , I conceive !

A member of the British Parliament stood up to speak.

"I conceive, I conceive, I conceive ...," he began, to which Churchill commented,

"The honorable member conceived thrice but did not bring forth anything. A woman conceives once and brings forth a child."

May be I am being uncharitable , but I cannot stop comparison with our “ Vehicle Scrappage Policy “ , which is being “ conceived “ for the past 2 years !

But finally there appears “ light at the end of the tunnel “, with Shri Nitin Gadkariji saying :

“ Policy would soon be put up before the cabinet for approval “

Context :

Scrapped vehicle market pegged at Rs 43,000 crore

Highlights :

Ø  9 Million vehicles could be scrapped by 2020-21, of which 75 % are two-wheelers

Ø  28 million vehicles could go off the road by 2025

Ø  CO2 emissions can be curbed by 17 % and PM by 24 %

Ø  6 million tons of steel scrap which India currently imports, can be met locally if old vehicles are recycled

Ø  Potential to save 8 million tonnes of oil even if 50 % of BS-II and BS-III go off road

Ø  Incentives some countries give for scrappage :

#  USA  ………. $   4,500

#  Germant……$   3,500

#  UK …………   $   3,330

#  France…….  $   1,400

Comments :

Ø  Shri Satyakam Arya ( MD – Daimler India Commercial Vehicles  /  satyakam@daimler.com )

  

      “ Three things that the Govt needs to do to promote scrappage are :

      #   Offer sizable financial incentives

      #   Develop resale market for the scrappage certificate for those who don’t want to replace their scrapped vehicles for new

          

     #    Fix the life-period for a commercial vehicle at 10 years

Ø  Shri Ashok Khanna ( Group Head, Auto Finance, HDFC Bank / ashok.khanna@hdfcbank.com  )

“ A comprehensive scrappage policy will result in reduction in costs, save foreign exchange and increase revenues in the long term

        “ The policy could be a win – win for all , as the consumer would benefit from the scrap value, GST savings , and

        discounts, while a dealer would gain from demand for new vehicles. For a vehicle maker, recycled metals would

        be available at a cheaper rate , and the government could save forex because of lower imports of these raw

        materials as well as get tax revenue from new vehicle sales “

       A personal car may be scrapped after 15 years and a two-wheeler after 10 years. In case of commercial vehicles

      , the end of life at 7-8 years or certain kilometers driven “

Ø  Shri Ashish Kale  ( President , Automobile Deler Association of India – FADA – fada@fada.in  )

“ ….. since it would be a voluntary policy, there should be financial incentives equal to at least 10 % of the new vehicle to the owner to make the scheme successful

The focus should be more on financial incentives rather than disincentives . If a 10 % kind of benefit is extended, we see a lot of consumers taking advantage of the scheme “

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So , everybody ( including the vehicle-owners ) want the government to provide a 10 % incentive ( discount on sale price ), for scrapping old petrol / diesel vehicles  and replace the same with new ( less polluting BS VI compliant but petrol / Diesel ? ) vehicle

What are the implications if this “ 10 %  Incentive “ suggestion   gets accepted by the government ?

Take a look at the following tabulations ( assuming current sale prices remain unchanged till 2025 ) :

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[ A ] …………… Current Sale prices of Petrol / Diesel vehicles and Incentive amounts

Type of Vehicle	Ave . Current Sale Price ( Rs Lakh )	Incentive @ 10 % ( Rs Lakh )
2 Wheeler	1.5	0.15
Passenger Vehicles	8.0	0.80
Commercial Vehicle	15.0	1.5

[ B ]……………No of Old Vehicles to be scrapped / replaced with new ones

By Year	Total ( Lakh )	2 Wheeler	Passenger Vehicles	Commercial Vehicles
2020 - 21	90 ( 9 million )	@ 75 % of the total = 67.5 Lakh	@ 20 % of the total = 18 Lakh	@ 5 % of the total = 4.5 Lakh
2024-25	280 ( 28 million )	@ 50 % of the total = 140 Lakh	@ 40 % of the total = 112 Lakh	@ 10 % of the total = 28 Lakh

[ C ]……………Incentive Burden for Government

Till Year	For 2 Wheelers ( Rs crore )	For Passenger Vehicles ( Rs Crore )	For Commercial Vehicles ( Rs Crore )	Total ( Rs Crore )
2020-21	67.5 Lakh x 0.15 Lakh = Rs 1,000 Cr	18 Lakh x 0.8 Lakh = Rs 1,400 Cr	4.5 lakh x 1.5 Lakh = Rs 675 Cr	3,075
2024-25	140 lakh x 0.15 Lakh = Rs 2,100 Cr	112 Lakh x 0.8 Lakh = Rs 8,960 Cr	28 Lakh x 1.5 lakh = Rs 4,200 Cr	15,260

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Scrapping 28 million vehicles in 5 years =  5.6 million vehicles EACH YEAR

By now , we probably have on our roads , 280 million vehicles { Petrol / Diesel }

Even if we are able to step up the scrappage at 10 million vehicles per year, it will take 30 – 40 years to scrap ALL existing petrol / diesel vehicles

But, it will not help solve much of our POLLUTION problem unless these old petrol / diesel vehicles get replaced with ELECTRIC VEHICLES ( zero pollution ), which are 50 % to 500 % more expensive than the petrol / diesel vehicles

A 10 % discount for EV, will not enthuse existing vehicle owners to replace theirs with EVs. They will continue to buy petrol / diesel vehicles at the discounted rates !

Hence, a financial incentive ( of 10 % ) – although devised to encourage OLD VEHICLE SCRAPPAGE, - may not serve the purpose of switch-over to EVs

And , it will be a bad idea, to offer 25 % discount for purchase of new EVs !

What we need is to impose a  FINANCIAL DIS-INCENTIVE , on ALL vehicle owners, as suggested in :

Transport : an Integrated Logistic Plan ?                                    [ 20 Nov 2018 ]

Pigovian Tax for Polluters ?                                                        [ 03 Apr 2019 ]

 

National Clean Air Tax ? – a Pigovian tax ?                                   [ 11 Jan 2019 ]

 

As far as incentives to the VEHICLE SCRAPPAGE INDUSTRY is concerned, I hope Shri Gadkariji will incorporate my following specific suggestions ( sent as E Mails ), in the VEHICLE SCRAPPAGE POLICY, about to be born :

 

Rename it , “ Vehicle Recycle Policy “                [  08 Aug 2018  ]

 

PIYUSH PLAN  ?   ………………………………………………. [ 27  Mar  2016 ]

Retiring Old Vehicles - Gadkari Style ? ………. ……[ 30  May   2016 ]

Young or Old ?  …………………………………………………….[ 27  Aug  2016 ]

From OLD to NEW ?  No , go NEWER !  ………………[ 22  Sept   2016  ]

Building Castles in the Air ?   …………………………………[ 12  Mar  2017  ]

Best out of a Bad Bargain ?  ……………………………………[ 29  Mar  2017  ]

Car Grave-Yard of World ?  ……………………………          [  14  Feb  2018  ]

One door closes  ;  Another opens   …………………………..[ 27  Feb  2018  ]

Mahindra Accelo : Saluting a pioneer  ………………………..[  19  June  2018  ]

 

Scrapping Old Vehicles : Swiss Challenge Solution       [  24  July  2018  ]

 

 

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26  Feb  2020

hcp@RecruitGuru.com