Auto scrappage plan could clean air, boost sales

The government is exploring a car scrappage scheme, where you can trade in your old, fuel-guzzling car and buy a new, fuel-efficient one, saving some money in the process.

The government is exploring a car scrappage scheme, where you can trade in your old, fuel-guzzling car and buy a new, fuel-efficient one, saving some money in the process. The scheme ? on the lines of the cash-for-clunkers model adopted the US, Japan and some European countries during the peak of the recession ? could boost car sales and improve overall fuel efficiencies.

The ministry of heavy industries and public enterprises has set up a pilot project in Chennai which is working out the modalities of the scrappage scheme. The move has received the backing of the environment ministry, which feels that apart from reducing pollution and increasing fuel efficiency, components from the old cars could be recycled for use in other products.

Under the scrappage scheme, all private vehicles must be compulsorily replaced after a certain duration, say 15 years. The scheme?s main purpose is to replace polluting, fuel-guzzling cars with eco-friendly, fuel-sipping cars; however, if it turns out to be successful, car-makers stand to gain significantly.

In 2009, several western countries and Japan introduced what came to be called cash-for-clunkers schemes, phasing out vehicles aged 10-15 years. France offered a rebate for replacing cars older than 10 years while Germany offered a scrappage premium for replacing cars older than nine years. In Austria, the premium is available for replacing cars 13 years and older. Japan too offered rebates for cars older than 13 years.

The matter first came up for discussion two weeks ago at a meeting of the parliamentary standing committee on environment which had representatives from several industry bodies to work out ways to cut emissions.

The heavy industries ministry?s proposals will go to the ministry of road transport for initiating an amendment to the two-decade-old Motor Vehicle Act. If the amendment goes through, passenger vehicles older than a fixed time period will need to be compulsorily phased out.

?We are still working out the scheme?s modalities, especially the time period after which a car should be removed from roads,? a government official told FE. He said the government would also work out an incentive package for consumers to dispose of older vehicles, but so far, no decision has been taken. ?Many components go into the car. Each has its own set of warranty period that needs to be closely examined; for instance, plastic wears out before steel and hence the component would have to be replaced,? the official added.

Environment ministry secretary T Chatterjee has supported the initiative. According to him, the scheme would help in recycling of key automobile components. ?These could be refurbished like ships where the metal is reused and all other scrap recycled. India is good at recycling and there will not be much addition to hazardous solid waste. However, there could be occupational hazards associated with recycling; but such a scheme will not add to air pollution though solid waste may increase slightly,? Chatterjee said.

The country?s auto industry has always backed an Indian version of the scrappage schemes abroad, demanding that cars which do not meet environmental standards be phased out. The Society of Indian Automobile Manufacturers Association (Siam) had first formally recommended the scheme in 2009. The auto industry feels that cars older than 10 years should be ordered off roads. The demand became stronger last year following environment minister Jairam Ramesh’s tirade against sport utility vehicles, which are seen in some quarters as as polluting and fuel-guzzling.

Siam president Pawan Goenka told FE that such a move would be very beneficial. ?Siam has been proposing such a step for quite some time. If the scheme is implemented, pollution levels would come down, fuel efficiency would improve and it would help propel the Indian auto industry’s growth,? he said.

Goenka, however, added that such a scheme would have to be well thought-out. ?How do you get new vehicles financed? Some form of compensation would have to be thought of as well,” he said. Maruti Suzuki chief general manager (marketing) Shashank Srivastav too welcomed the initiative.

Sceptics say such a scheme could work in the developed world but would be illogical in a developing economy like India.

?Though it will will benefit the car industry and the government is welcome to introduce it, it should not be done in the name of environment because replacing old cars with new in the name of cleaning the air only adds to the number of cars on roads. This will not clean the air. It is a myopic view with a narrow interest for manufacturing more vehicles,? Centre for Science and Environment director general Sunita Narain said.

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First published on: 04-07-2011 at 03:47 IST