1 Aug 2018

Scrappage policy: As PMO returns draft note, Road Min increases axle load limit to push old commercial vehicles off road [Source:]

Sources said that the government is wary of taking any decision that is “hard on the industry”

The much debated vehicle scrappage policy, which was returned by the Prime Minister’s Office (PMO) seeking amendments, is unlikely to be passed in this financial year, Moneycontrol has learnt.

Sources have told Moneycontrol that the decision to defer the policy, also known as voluntary vehicle modernisation programme (VVMP), was returned by the PMO to avoid hampering its electoral prospects in the Lok Sabha elections of 2019.

“Scrappage policy is unlikely to be considered in this financial year… It’s a complete political decision,” said a source. “It can be assumed that the policy will now be taken up only after elections”.

Scrappage policy was proposed by the union ministry of road transport and highways in 2016 to phase out commercial vehicles that are more than 20 years old and are non-compliant of Bharat Stage emission norms.

Had the policy received Cabinet nod, age of commercial vehicles would have been capped at 20 years. Thus, CV bought on or before 1st January, 2000 would have been prohibited to ply on roads from 1st January 2020. Similarly, CVs bought before 1st January, 2001 would have become redundant after 1stJanuary, 2021 and so on.

Apart from this, the draft note talked about setting up of scrapping centres for these vehicles by Ministry of Steel coupled with Ministry of environment notifying rules for environment friendly ways to scrap commercial vehicles.

The draft note of scrappage policy was retuned by the PMO seeking various amendments. These include making the policy voluntary rather than mandatory for the commercial vehicle owners, roll back of Goods and Services Tax (GST) waiver on replaced commercial vehicles, etc.

"All these amendments have been suggested only to borrow time and keep the policy in limbo till elections... Consultations with stakeholders and states will start all over again just to avoid its passage," the source said.

Moneycontrol had first reported in February this year that the Road ministry had proposed to levy 18 percent GST on replaced vehicles under the scrappage policy against a tax of 28 percent levied on new commercial vehicles.

Sources said that the government is wary of taking any decision that is “hard on the industry”.

Another source added that the policy will now face several roadblocks as the amendments suggested by the PMO are not feasible.

“They are not ready to give GST waiver on replaced vehicles… Also, they don’t want another unrest from transporters due to the 20 year cap… They want original equipment manufacturers (OEMs) to give the discounts… But again, why would they give discounts?” added the source.

Transporters had gone on strike last week to protest against e-way bill burden, high toll charges, exorbitant third party insurance premium and soaring diesel prices.

The strike was called off late Friday night after discussions were held among ministry of road transport, ministry of finance and All India Motor Transport Congress (AIMTC).

Across India, losses due to the strike were pegged at Rs 10,000 crore, with Maharashtra alone seeing over Rs 2,000 crore. Vegetable and fruit supplies, dairy supplies and movement of manufactured goods in major cities was hit due to approximately 93 lakh truckers being off road.

Sources have added that Centre’s decision to increase axle load limit and its immediate implementation was due to the red flag raised by the PMO against the Scrappage policy.

“Centre is batting on axle load to offset snail’s pace progress in scrappage policy. With the coming of better quality trucks with higher axle load availability, sale in the market will be pumped up for new commercial vehicles,” said a source adding that government hopes that demand for new trucks will push older vehicles  off road.

Union ministry of road transport and highways, on July 16th 2018, increased the maximum cap of axle load limit by 20 to 25 percent cross various categories to keep the limit “at par with international standards”.

Gross vehicle weight (GVW) of a two-axle truck was increased to 18.5 tonne from 16.2 tonne and GVW for a three-axle truck was increased to 28.5 tonne from 25 tonne. For a five-axle truck, the vehicle weight was increased from 37 tonne to 43.5 tonne.