Road transport and highways secretary Giridhar Aramane told a television channel that the government expects car makers to offer at least 2-3 per cent discount initially and as the scrappage policy gains momentum, the discount is likely to be higher.
“They (auto makers) have agreed to give some incentives but the quantum, they have to decide,” Aramane said.
However, Maruti Suzuki chairman R.C. Bhargava told a channel that “if a vehicle is unfit and it has to be scrapped where is the need for giving the person any incentives to buy a new vehicle? He has an unfit vehicle which should not be allowed to be used because it is a hazard for everybody”.
“Setting up of necessary infrastructure for scrapping and further clarity on the scrap value of vehicles and tradeability of scrapping certificate remain key for successful implementation and realising the true potential of the policy,” Shamsher Dewan, vice-president & group head – corporate sector ratings of ICRA, said.
ICRA estimated that the population of M&HCVs older than 15 years would be 1.1 million units by FY2024, offering a significant potential for scrappage.
However, given the nature of usage of such vehicles, the actual scrappage potential could possibly be lower. Nevertheless, even if a proportion of these vehicles get scrapped, it can offer a fillip to volumes by spurring replacement demand, and support the industry out of its trough. ICRA estimates that even with 15-20 per cent conversion, it can provide a 20-25 per cent upside to industry volumes in FY2024.
It has estimated that the total PV population of 40.8 million, out of which about 3 per cent i.e. 1 million are over 20 years old. Once implemented, the policy could result in about 10 per cent-12 per cent cost benefit for new car buyers with a potential to add 300,000 units (or 7-9 per cent upside) to industry volume even with 30 per cent conversion in 2024.
“The headwinds for implementation would be in the form of having more infrastructure in place to build organised scrapping centres, which currently India does not possess. To further incentivise the consumer, there should be GST concessions on purchase of new vehicles, as tax rates in India on new automobiles are exorbitant,” Care Ratings said.
