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  1. Changing gears: Govt does well to propose tax sops to incentivise scrapping of old vehicles

Changing gears: Govt does well to propose tax sops to incentivise scrapping of old vehicles

Given how old commercial vehicles are the worst offenders when it comes to vehicular pollution—as per an AT Kearney report there are 11.2 lakh medium and heavy commercial vehicles that are more than 15 years old, and these contribute 34% of the pollution—there is a need to incentivise owners to stop using these.

By: | Published: February 9, 2018 5:06 AM
old commercial vehicles, old vehicles, tax sops, incentivise scrapping, vehicular pollution,National Green Tribunal , pollution The tax rebate on new vehicles, transport minister Nitin Gadkari has said, will be worked into the GST applicable on such sales. (Rueters)

Given how old commercial vehicles are the worst offenders when it comes to vehicular pollution—as per an AT Kearney report there are 11.2 lakh medium and heavy commercial vehicles that are more than 15 years old, and these contribute 34% of the pollution—there is a need to incentivise owners to stop using these. In September last year, the National Green Tribunal had ordered commercial vehicles older than 15 years scrapped. While this means a big boost for the auto industry—as older vehicles are shunted out, new vehicles will be required to replenish fleets—it means added costs for the transport and logistics sector. The government has, therefore, done well to propose a three-pronged incentive strategy to prod transporters to junk old trucks. Under the proposed Voluntary Vehicle Fleet Modernisation Programme, vehicle-owners will be assured a fair value for the scrap and they will get certain tax incentives on new purchases apart from any potential discounts on the vehicle prices themselves.

The tax rebate on new vehicles, transport minister Nitin Gadkari has said, will be worked into the GST applicable on such sales. The transport ministry is in talks with the finance ministry to get the tax rebate proposal cleared by the GST Council. If the incentive strategy works, some 28 million old vehicles could go off the road, making space for vehicles that conform to newer emission norms—India is set to adopt the BS VI (Euro VI) norms from April 2020. While India is following the precedent set by many developed nations that have incentivised scrapping in the past—the US’s cash-for-cunkers scheme of 2009 being one of the most notable of such schemes—it could think of using this as a pivot for adoption of more cleaner automobile tech.

The government wants to push adoption of electric vehicles (EVs) in the long run, and this is an opportunity to incentivise this through deeper rebates for EV purchase—though pushing EVs will need to have the requisite charging infrastructure in place.

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