The new scrappage policy announced by the Union ministry of road transport and highways (MoRTH) is unlikely to perk up demand significantly, said Crisil in a release on Tuesday.
The total population of commercial vehicles that will be older than 20 years in fiscal 2021 would be 50,000 vehicles, much lower than the government’s earlier estimate of 2.8 crore vehicles and Crisil’s internal estimate of 6,40,000 vehicles. “In any case, 70,000-90,000 vehicles are scrapped every year. So, we believe the impact of the scrappage policy will be limited,” Crisil said.
According to Crisil, while the vehicle scrappage policy is expected to be implemented in the near term, the government intends to enforce the policy from April 1, 2020, which will coincide with the implementation of BS-VI norms. Though the benefit offered under the scrappage policy is expected to be 15% of the vehicle’s price, the effect will be muted as prices of diesel vehicles are expected to go up by 10-15% once the new norms come into force.
However, the additional benefit from the scheme will prop up CV demand to some extent when vehicle prices increase because of change in emission norms (from BS-IV to BS-VI), Crisil pointed out. “Having said that, we await disclosure of the final benefits from the scheme and approval by the GST Council to understand the nuances of the policy further,” Crisil added.
As per the latest update, the two major changes made to MoRTH’s earlier draft note are change in the age of the vehicle from 15 years to 20 years and policy to be implemented from April 1, 2020, coinciding with the implementation of BS-VI norms.