India’s Vehicle Scrappage Policy to aid both the environment and the economy

Ernst & Young (EY) India’s latest report lists out the various aspects of the new Vehicle Scrappage Policy and its outcomes which prove to have many advantages.

June 29, 2021

The report mentions that the policy would create a circular economy which would benefit both the existing and new investors.

It also addresses the potential of a flexible ecosystem which is mutually beneficial to new investors and the traditional automotive ecosystem.

From an environmental standpoint, it will lead to a reduction of emissions, along with the recycling and re-use of spare parts.

It exhibits the potential to increase vehicle sales and reduce the import of raw materials and fuel.

Giving a fillip to India’s automotive sector by starting an automotive circular ecosystem, India’s vehicle scrappage policy is playing an incumbent role . According to the consultancy firm 

Ernst & Young (EY), India’s vehicle scrappage policy has immense benefits for the economy, stakeholders, as well the environment. The policy, authorised in March 2021 by the road transport minister Shri Nitin Gadkari, is a government initiative towards removing commercial and passenger vehicles of over 15 and 20 years, respectively, if they do not pass the mandated fitness and emission tests. EY India believes that the policy will create a circular economy which offers opportunities for both existing players and new players in the automobile market to develop new products to aid the end-of-life vehicle’s purchase and resale processes.   

As per the company’s latest report, the policy creates a flexible pattern which allows for new investors to collaborate with the traditional automotive ecosystem in a manner which would bring the best of both worlds to consumers. The Covid-19 pandemic brought a new perspective of the current chain value structure, shedding light on the vulnerability it brings to both the supplier and the consumer. The policy offers a 5 per cent rebate to new purchases on the disposal of an old vehicle, and manufacturers have been instructed to provide a 5 percent discount to purchasers against the scrapping certificate. In this regard, original equipment manufacturers are also willing to explore newer areas of mobility such as autonomous, connected and shared, and new forms of ownership.

With regards to the environment, the policy has the potential to bring about many positive changes, with additional contribution from the rising popularity of electric vehicles. It calls for a reduction in the pollution levels through a reduction in emissions, cut in the fuel import bill and the recycling and re-use of spare parts. Newer business models which benefit both the environment and the economy are in the process of completion. From an economic and investors’ standpoint, the policy exhibits potential to become a major driving force to increase vehicle sales, along with increased savings on imported raw materials. Consequently, this can widen the automotive ecosystem, including fitness centres, scrapping centres, automation and new aspects of the supply chain.