‘Cash for clunkers’ scheme likely to happen in India

It is learnt that the government of India's Ministry of Road, Transport and Highways (MoRTH) is preparing a vehicle scrappage -- dubbed 'cash for clunkers' -- proposal to help vehicle owners discard old vehicles and earn incentives up to Rs 150,000. 

By giving a cash incentive to buyers of new and more fuel-efficient vehicles, the move is aimed at supporting the automobile industry and also reducing pollution levels which have reached alarming levels in many Indian cities, including capital New Delhi.  

At present, Delhi-NCR, has more than 300,000 commercial vehicles which are over a decade old, 35-40 lakh two-wheelers as well as 12-13 lakh cars with this lifespan. Earlier this year, in light of the National Green Tribunal (NGT) banning 10-year-old vehicle from plying in the national capital, apex industry body SIAM had pitched to help the government find solutions – both vehicle-related and non-vehicle related. It has suggested evolving a scrappage policy, which offers excise incentives to make scrapping of 15-year-old vehicles attractive for vehicle owners so that the vehicle is not impounded in the capital and sold elsewhere. 

Earlier there was a concern about handling and disposal of scrapped vehicles. Now, it is learnt that MSTC Ltd (formerly known as Metal Scrap Trade Corporation) and some private sector companies have evinced interest in such a project. 

Speaking to Autocar Professional today, Sugato Sen, deputy director general, Society of Indian Automobile Manufacturers (SIAM), said: "SIAM had long back mooted 'Project Modern Fleet' which was to be a voluntary scheme for incentivising vehicle scrappage of over 15-year-old vehicles. The proposal went upto the prime minister level from where it went to the Ministry of Finance and then to the Ministry of Heavy Industries.

"A committee was also formed under Nitin Gokarn, the previous CEO of NATRiP, and it gave its recommendations last year. Since Union minister Nitin Gadkari has also spoken of it, we are hopeful that something will be done in this regard. The National Green Tribunal had also passed a notification banning 15-year-old vehicles from Delhi roads. SIAM’s focus is on having an incentivised and voluntary scheme.”   

MoRTH is understood to have mandated global consultancy firm McKinsey & Co to develop a detailed proposal after which it will approach the Ministry of Finance to deliver incentives to vehicles owners to surrender old, polluting vehicles to recycling agencies.

As reported in the Indian Express, Nitin Gadkari, Union Minister for Road, Transport & Highways, who spoke at the International Conference and Exhibition on Public Transport Innovation (ICEPT), held yesterday in New Delhi, said: “McKinsey is doing the research for us on a cash-for-clunkers scheme. We are looking at a proposal wherein if you sell your old vehicle you will get a certificate. When this is produced at the time of a new purchase, you will get a discount of up Rs 30,000-50,000 on passenger vehicles.”

Clubbed together with tax exemptions, cumulative benefits can accrue up to Rs 150,000 for big commercial vehicles like trucks. The proposal has it that surrendered vehicles in working condition could be retro-fitted with lithium ion batteries and resold in the market — alternately, automotive scrap may be recycled for industrial use.

Scrappage policy benefits industry in Europe and US
Such ‘cash-for-clunkers’ schemes have been introduced in some countries like the UK, US, Germany, France and Spain, for limited periods during the global recession of 2009, in a bid to drive sales in the domestic auto industry.   

Under the UK car scrappage scheme, a £2,000 (Rs 1.96 lakh) incentive was paid to motorists who scrap cars registered before 31 August 1999 to buy a new car. The government contributed £1,000 and the remaining amount came from the dealers and manufacturers. It is understood that the UK government provided £300 million (Rs 2,952 crore) of funding for the cash for clunkers scheme. 

Photograph: Press Information Bureau, government of India