Carrot and stick approach: 'Voluntary Scrappage Policy, Green Tax to incentivise auto customers'

In a post-Budget interaction with ETV Bharat, FADA President Vinkesh Gulati says the recent proposal like Green Tax, Voluntary Automobile Scrappage Policy and the Production Linked Incentive Scheme will help customers and automobile manufactures in a big way.

New Delhi: The recently announced Green Tax as well as the Voluntary Vehicle Scrappage Policy will act as the final push for automobile customers to replace their old and no-longer-drivable vehicles with the newer ones that are more fuel-efficient, safer and environment-friendly, said Vinkesh Gulati, President, Federation of Automobile Dealers Association (FADA).

In a post-Budget interaction with ETV Bharat, FADA President says the Green Tax announced by the Union Ministry of Road Transport and Highways and the Voluntary Vehicle Scrappage Policy figured in the latest Budget presented by Finance Minister Nirmala Sitharaman resemble a ‘carrot-and-stick approach’ and will benefit the automobile industry as a whole.

“Our experience shows that people are serious about their vehicles only for the initial five years. But we need to understand that if the vehicle is not maintained well, it will increase the pollution and decrease its efficiency; we should also consider that a vehicle which was purchased around 20 years ago does not have the kind of safety norms that today’s vehicle has,” said Gulati.

“So, the view of FADA has been that it has to be a carrot and stick. If you are still driving an older vehicle, there is a green tax to pay, and if you want to replace it, go ahead with scrappage,” he added.

To recall, the central government on 25 January proposed to levy an additional green tax on all transport vehicles older than 8 years and personal vehicles older than 15 years at the rate of up to 25% of road tax.

Notably, vehicles registered in highly polluting cities could be taxed as much as an additional 50% of road tax. However, electric vehicles and vehicles using alternative fuels like CNG, LPG and ethanol would be exempted from this tax.

Meanwhile, under the voluntary scrappage policy, vehicles would undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles and after 15 years in case of commercial vehicles.

Number of years vs kilometres: What is the right criterion?

On being asked whether vehicle health can be judged better by the number of kilometres it travelled rather than its age, Gulati didn’t seem to agree.

Some automobile experts had suggested that since vehicle usage differs from individual to individual, therefore the numbers of kilometres a vehicle travelled might give the real picture of vehicle usage.

“In my view, the number of years is most important because of the quality of the vehicle. For instance, a vehicle which was bought 15 years back was of BS Zero standard. So, those vehicles are a problem. Because, the vehicle may be on the road only for 10,000 km, but the kind of pollution it has is very high,” said Gulati.

“One more problem on the kilometre front is, if the speedometer of a vehicle gets replaced due to an accident, it is difficult to trace,” he added.

On Production-Linked Incentive Scheme (PLI)

“We see that passenger vehicle production is not able to match the demand today. One of the reasons for this is the non-availability of semiconductors. These kinds of situations arise because we are dependent on imports. In my view, PLI will bridge this gap,” noted Gulati.

Last November, the government had brought the automobile sector under the PLI scheme to boost domestic manufacturing. As per the initial estimates, the government should spend around Rs 57,000 crore over a period of five years on the auto sector under the scheme.

“If this scheme materialises, it will be easy for India to develop and react faster than how we are doing today… the PLI will surely help,” he added.

(Shravan Nune, Business Editor, ETV Bharat)