Cash for clunkers in India too? Soon you may be able to turn in your old car and get up to Rs 1.5 lakh

The Modi government could soon come out with a policy offering financial incentives of up to Rs 1.5 lakh on surrender of vehicles that are over 10 years old. The aim is to promote the replacement of old vehicles with modern ones that have better emission standards and to reduce traffic.

By giving a cash incentive to buyers of new and more fuel-efficient vehicles, the move is aimed at supporting the automobile industry and also reducing pollution levels which have reached alarming levels in many cities, including national capital New Delhi.

Gadkari plans to decongest Indian roads offers incentives to motorists to surrender old cars

"We are bringing such a scheme that if you sell your old vehicle you will get a certificate which on being produced at the time of new purchase will get you a discount of up to Rs 50,000 For small vehicles like cars it will be up to Rs 30,000. Besides, there will be exemptions in taxes and total benefits for big vehicles like trucks will be up to Rs 1.5 lakh," Transport Minister Nitish Gadkari said.

 Cash for clunkers in India too?  Soon you may be able to turn in your old car and get up to Rs 1.5 lakh

Representational image: AFP

The ministry, which has mandated global consultancy firm McKinsey to outline the broad contours of the scheme, will soon approach the Finance Ministry to provide incentives to vehicles owners to “surrender” old, polluting vehicles to recycling agencies.

Cash for clunkers has been implemented across the globe

Such ‘cash-for-clunkers’ schemes have been introduced in some countries like the UK, US, Germany, France and Spain, for limited periods during the global recession of 2009, in a bid to drive sales in the domestic auto industry.

The  government buys up some of the oldest, most polluting vehicles and scraps them. If done successfully, it holds the promise of stimulating the economy, improving the environment and reducing  gas consumption and improve road safety.

In the US, cash for clunkers was introduced during the recession and was an attempt to stoke growth within the economy. the scheme was tailor made in such a way that it also incentivised the US consumer to shift away from gas guzzlers.

Under the UK car scrappage scheme, a £2,000 incentive was paid to motorists who scrap cars registered before 31 August 1999 to buy a new car. The government contributed £1,000 and the remaining amount came from the dealers and manufacturers.

China substituted an estimated 2.7 million high polluters from the national car fleet by offering rebates of $450 to $900 from June 2009 to May 2010 while Indonesia launched a scrappage scheme in 2009 paying owners of vehicles at least 10 years old MR5,000 ($1,354) was shared equally by the government and auto makers.

The plan proposed by Gadkari:

The plan is to set up 8-10 industrial units near ports like Kandla which will not only give certificates for accepting old vehicles but would recycle vehicles from India and abroad and thereby give a boost to employment and economy.

"We are also planning to import old cars from across the globe and recycle them near the ports. Ports like Kandla (Gujarat) have a good draft of around 20 metres. The plan is to set up eight to 10 industrial units there, which will boost employment," Gadkari said. He added that there is an urgent need to recycle as more old vehicles were running on roads with old technology that not only fall short of safety norms but also create pollution.

"We are going to recommend the scheme to the Finance Ministry... If incentives will be given, it will be easy for people to surrender their old vehicles and get new vehicles of international specifications...may be of Euro 6 standard," he said.

"Already National Green Tribunal has given a decision on pollution.... Manufactures now seeking time for four to five years. Manufacturers can as early as possible go to the mark of Euro 5 and 6 and I suggest if they could go for Euro 6," he said.

Also he called upon foreign manufactures to supply bio-fuel based quality buses at economical prices given the fact that India is a huge market for them.

The minister also said the new Road Transport and Safety Bill would be introduced in the next session of Parliament. The Bill proposes steep penalties of up to Rs 3 lakh along with a minimum seven-year imprisonment for death of a child in certain circumstances, besides huge fines for driving violations.

Earlier this year the National Green Tribunal (NGT)  had banned 10-year-old vehicle from plying in the national capital. At the time, the apex industry body SIAM had pitched to help the government find solutions – both vehicle-related and non-vehicle related. It has suggested evolving a scrappage policy, which offers excise incentives to make scrapping of 15-year-old vehicles attractive for vehicle owners so that the vehicle is not impounded in the capital and sold elsewhere.

Automobile manufacturers support a scrap policy because it raises market demand for new cars. In Delhi, the market share of diesel vehicles is about 45 percent. As most commercial vehicles are diesel powered, the segment is bound to get a boost.

With inputs from Agencies

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Updated Date: Aug 14, 2015 12:04:38 IST