‘Vehicle scrappage won’t find takers’

Limited incentives and poor cost economics for trucks in the Vehicle Scrappage Policy, coupled with lack of addressable volumes for other segments is unlikely to drive freight transporters to replace their old vehicles with new ones, a report said.

Though the scrappage volume of buses, PVs and twowheelers is expected to be limited as well, the policy's impact on new commercial vehicle (CV) sales could be sizeable, based on addressable volume, ratings agency Crisil Research said.

Under the proposed policy, a scrapped vehicle will be offered a monetary value close to 4-6% of the showroom value. There could even be up to 5% discount on the purchase of a new vehicle if a scrap certificate is produced.

In addition, it also offers a 25% discount in road tax, among others. It also proposes to de-register vehicles that fail fitness tests or are unable to renew registrations after 15-20 years of use.

According to Crisil, in the bus segment, many buses owned by state transport undertakings will have a life of over 15 years. In comparison, buses operated for intercity, staff, school and tourist segments typically do not have a life beyond 15 years, and would thus be outside the ambit of the scrappage policy.

Crisil Research estimates that around 45,000 buses, largely owned by STCs, could be scrapped and replaced, it said.

Assuming a three-year window, starting April 2022, scrappage of around 15,000 buses annually could result in 15-20% incremental new bus sales - based on the average of around 90,000 buses sold between fiscals 2016 and 2020.