Nearly 80% Commercial Vehicles Operators Will Be Affected by New Vehicle Scrappage Policy: Unions

If the proposed Vehicle Scrappage Policy is implemented, it may lead to the elimination of petty owners owning about 80% of all commercial vehicles from India’s road transport sector, fears the All India Road Transport Workers’ Federation (AIRTWF). On March 15, the Ministry of Road Transport and Highways (MoRTH) notified the draft rules on Scrappage Policy giving a 30 days period for submission of objections and suggestions from various stakeholders.

Since the Scrappage Policy was announced in the Union Budget 2021-22, private transport operators and drivers have been holding protests across states against the proposed compulsory scrapping of older vehicles.

As per the draft rules of the policy, all commercial vehicles over 15 years old and personal vehicles over 20 years old will be marked for scrapping if they fail a compulsory fitness test. The draft policy will be applicable to all private vehicles as well, including two-, three- and four-wheelers. Vehicles which pass the test have the option for re-registration, but the charges are proposed to be hiked from eight to around 20 times depending on the type of vehicles. 

Union Minister for Road Transport and Highways Nitin Gadkari said in the Lok Sabha in March that the new regulatory regime will begin from April 2022 with the mandatory scrapping of all vehicles over 15 years old owned by the government and all Public Sector Undertakings (PSUs). In 2023, all heavy commercial vehicles will undergo mandatory fitness tests and from June 2024, the  policy will be applicable for all vehicles. 

Further, Gadkari had said that the Ministry will issue advisories to automobile companies to give a 5% discount on purchase of new vehicles after an old vehicle is scrapped based on a certificate. The Ministry also said that it has proposed a rebate on GST to the Finance Ministry and advised state governments for road tax concessions for purchase of new vehicles against scrapping certificates. 

However, it is uncertain whether the proposed incentives will be accepted by the vehicle manufacturers.

Also read: New Vehicle Scrappage Policy: Burden on Consumers, Free Pass for Auto Industry

The road transport industry and the automobile industry in the country have been in serious crisis even before the outbreak of the COVID-19 pandemic, for reasons including the defective policies of the Union government related to the abnormal enhancement of excise duties on fuel prices, insurance premiums and higher toll taxes, the AIRTWF pointed out to the Ministry in a letter of submission of objections to the scrappagein policy. 

“Petty owners having one or two commercial vehicles and themselves working as driver-cum -owner constitute almost 80% of the total commercial vehicles in the country,” said K K Divakaran, general secretary of AIRTWF.  “Many of them are not in a position to pay the monthly instalments of the loans which they avail from private finance companies for the purchase of the vehicle. At this juncture, the introduction of the Scrapping Policy will be an unbearable burden on them and will lead to eliminating them from the field,” he said. 

On the other hand, automobile makers in the country are reportedly gearing up to start the vehicle scrapping services’ businesses on a large scale. 

“In India, a vehicle scrapping policy has been discussed in government circles in one form or another for close to a decade, but never fructified due to conflicting or at least divergent views and interests between different stakeholders, such as the automotive industry, personal vehicle and truck owners, and different departments of the government,” D Raghunandan of the Delhi Science forum had highlighted in an earlier report in NewsClick.

Pointing out that the government has failed to prioritise reduction of pollution and in devising targeted incentives for encouraging private vehicle owners in opting for the scrapping policy, Raghunandan wrote, “All in all, while not unacceptable in principle, the new scrappage policy is poorly designed to achieve its own stated goals of reducing pollution, and is heavily weighted in favour of the automobile industry.”

According to official data, there are 51 lakh Light Motor Vehicles that are more than 20 years old in India. Another 34 lakh LMVs are over 15 years old. Further, there are around 17 lakh Medium and Heavy Commercial Vehicles  which are older than 15 years.

If the policy is made compulsory, AIRTWF wrote to the Ministry, “one third of the cost of the new vehicle should be subsidised by the Union Government, another one third should be borne by the manufacturing company as discount and the rest of the one third can be borne by the vehicle owner for which the Government should make arrangements for Bank loans.”

The road transport workers’ unions are also demanding the government to organise extensive consultations among stakeholders and an extension of time period from 30 days to 180 days for submissions on the draft policy.