Limited incentives makes scrappage policy unattractive for trucks
Owing to limited incentives and poor cost economics for trucks in the Vehicle Scrappage Policy, combined with lack of addressable volumes for other segments, owners of old trucks might not find it financially viable to scrap their old vehicle and invest in a new one.
Freight transporters are unlikely to replace their old vehicles with new ones as a part of the scrappage policy due to limited incentives.
Though the scrappage volume of photovoltaics (PVs), buses, and two-wheelers are expected to be limited as well, the policy’s impact on new commercial vehicle sales could be sizeable based on addressable volume, Credit Rating Information Services of India Ltd (CRISIL) said in its report.
The policy proposes to deregister vehicles that fail fitness tests or are unable to renew registrations after 15 to 20 years of use.
According to CRISIL, several buses owned by state transport undertakings will have a life of over 15 years. Compared to this, buses operated for intercity, staff, school and tourist segments typically do not have a life beyond 15 years and would thus be outside the scope of the scrappage policy.
Regarding passenger vehicles, renewal of registration fees is proposed to be jacked up from Rs 600 to Rs 5,000 (valid for five years) for PVs older than 15 years, which is a surge of more than eight times.
The potential benefit from scrapping a 15-year-old, entry-level small car will be Rs 70,000, whereas its resale value is around Rs 95,000. According to the CRISIL report, this makes the scrappage policy unattractive.