Union Budget 2021 | Automotive sector welcomes vehicle scrappage policy

Industry leaders expect it to boost demand for new vehicles, help environment

February 01, 2021 06:45 pm | Updated 09:37 pm IST - CHENNAI

Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles (PV), and after 15 years in the case of commercial vehicles (CV). File Photo.

Vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles (PV), and after 15 years in the case of commercial vehicles (CV). File Photo.

Leading players in the Indian automotive sector have welcomed the Centre’s move to separately announce a voluntary vehicle scrapping policy to phase out old and unfit vehicles.


While tabling the Union Budget for 2021-22, Finance Minister Nirmala Sitharaman said that the policy would help in encouraging fuel-efficient, environment-friendly vehicles, thereby reducing vehicular pollution and the oil import bill.


Vehicles would undergo fitness tests after 20 years in automated fitness centres in the case of personal vehicles (PV), and after 15 years in the case of commercial vehicles (CV). Details of the scheme will be shared separately by the Ministry.


Kenichi Ayukawa, president, Society of Indian Automobile Manufacturers (SIAM), described the Budget as “visionary”. “The government has adopted an expansionary stance with a thrust on infrastructure building with measures for efficiency improvement and increasing competitiveness. Good macroeconomic growth will translate to good auto sector demand. Specifically, the vehicle scrappage scheme has a good intent and the auto industry would be keen to work with the government on suggestions for maximising benefits to environment and society,” he said.


Welcoming the voluntary vehicle scrapping policy, Federation of Automobile Dealers Associations president Vinkesh Gulati said, “If we take 1990 as base year, there are approximately 37 lakh commercial vehicles (CV) and 52 lakh passenger vehicles (PV) eligible for voluntarily scrappage. As an estimate, 10% of CV and 5% of PV may still be plying on the road.”


Vipin Sondhi, MD & CEO, Ashok Leyland Limited, said that the implementation of a voluntary scrappage policy is good for the environment and good for setting in motion a circular economy. However, we await further details of the policy as the industry had requested an incentive-based scrappage policy for it to be effective, he said.


Guenter Butschek, CEO & MD, Tata Motors said: “For the automobile sector, which is a significant contributor to India’s GDP, there are multiple welcome announcements, including a voluntary vehicle scrapping policy to phase out old and unfit vehicles; augmenting public transport system in urban areas; continuing focus on adoption of cleaner fuels; enhancing outlays for developing road infrastructure and expanding the Swachh Bharat Mission.”


Warren Harris, CEO & MD, Tata Technologies, said that the Centre had finally set the tone for the recovery of the auto sector, which has been significantly impacted by the pandemic. This would not only help boost the demand for the production of commercial vehicles but also support the entire transportation ecosystem, he said.


Vinay Raghunath, partner and automotive sector leader, EY India said: “The scrappage policy is a much awaited development where, apart from boosting demand in the sector, it will simultaneously help reduce pollution and fossil fuel consumption while also enabling re-use of steel/aluminium. An extension of this policy to other aspects such as tyre scrappage may help boost demand in related sectors while also helping India become more atmanirbhar (self-reliant).”


Deven Choksey, MD, KR Choksey Shares and Securities, called it a big game changer for the auto and auto ancillaries sector. According to him, between 2001 and 2005, as many as 7 million passenger vehicles and 11 million commercial vehicles were registered and at least twice these numbers constitute the potential number of vehicles that could be scrapped.


Arun Firodia, chairman, Kinetic Group, felt that it would be a better idea to levy a green tax on vehicles that are more than 15 years old, instead of a voluntary scappage policy.


Nagesh Basavanhalli, group CEO & MD, Greaves Cotton Limited, said, “While the auto sector would have liked to see more direct measures in the Budget, however, the scrappage policy is a step in the right direction for both ecology and economy. The focus on rural and agri credit growth will also have a cascading effect on the auto sector.”


Martin Schwenk, managing director and CEO, Mercedes-Benz India, said, “The decision to spend more on infrastructure despite of the high fiscal deficit will boost overall economic revival and we should see positive impact on the PV market. However, the increase in auto component duties is unexpected in such a revival period, and it will increase the production cost, leading to higher cost for consumers. There could have been a further push towards e-mobility by lowering import duties on EV (electric vehicles).”


Tarun Mehta, co-founder and CEO, Ather Energy, said, “The voluntary vehicle scrappage policy announced to phase out old and unfit vehicles will encourage the sales of new vehicles. It is good to see that the government is looking at addressing the concerns regarding GST (goods and services tax) inverted duty structure. We look forward to more details on the inverted duty structure and the production-linked incentive (PLI) scheme announced by the Finance Minister.”


Sohinder Gill, director general, Society of Manufacturers of Electric Vehicles, thanked the FM for announcing the scrappage policy, and said that it would help in encouraging the adoption of greener vehicles.

“Finally, the much awaited scrappage policy has been announced, which is a welcome step. This will increase sale of new vehicles and in turn boost tyre demand,” said Dr. Raghupati Singhania, vice-president, JK Organisation, and CMD of JK Tyre and Industries Limited.

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