Scrappage offtake to skid on limited incentive and poor cost economics for trucks, lack of addressable volumes for other segments

The Centre’s scrappage policy is unlikely to have freight transporters queuing up to replace old vehicles with new ones. The scrappage volume of buses, passenger vehicles (PVs) and two-wheelers will be limited as well, a CRISIL Research analysis shows.

To be sure, the scrappage policy is much required as older vehicles are 10-12 times more polluting than newer ones. As things stand, India is home to six of the top 10 polluting cities globally, and is among the top five polluting countries. With vehicular pollution contributing nearly 15-30% (PM2.5 and PM10 level) especially in cities such as Delhi, the government is putting greater emphasis on weeding out old polluting vehicles (older vehicles are estimated to be 10-12 times more polluting than newer ones) through the scrappage policy.

The process kicked off in May 2016, with the Ministry of Road Transport and Highways (MoRTH) issuing a concept paper outlining the Voluntary Vehicle Fleet Modernisation Programme to encourage scrapping of vehicles manufactured before March 31, 2005. And in March 2021, MoRTH announced guidelines for the policy: