Proposed Scrappage Policy May Come To The Commercial Vehicle Market’s Rescue

The proposed voluntary-vehicle modernisation program (VVMP) drafted by the Ministry of Road Transport and Highways can boost commercial vehicle (CV) sales by 65 percent, cumulatively between fiscal 2018 and fiscal 2020, according to a statement issued by CRISIL Research.

The VVMP scheme is estimated to lead to incremental sales of 4.4 lakh commercial vehicles, primarily medium and heavy commercial vehicles (MHCV) worth around Rs 66,000 crore, the ratings agency noted in the statement.

The road transport ministry had released the first draft of the programme in May 2016. It was aimed at reducing emissions with a priority to get old fuel guzzling trucks off the road. The programme proposed offering tax benefits and discounts to those who discard their old vehicles bought before March 2005 or not meeting the Bharat Stage IV emission norm and replace them with new ones.

CRISIL expects over 85 percent of the additional sales to be in the MHCV segment as they traditionally had a longer lifespan of around 20 years, implying a large number of the big trucks currently plying in the country were bought before March 2005.

Pickup trucks, light CVs and MHCV buses will make up for a relatively smaller share in the vehicles being scrapped, as they typically have a shorter lifespan of 15 to 17 years before being scrapped, the release added.

Commercial vehicles weighing less than one tonne would not benefit since the segment was introduced only in 2005 hence a very few of them would’ve been purchased before the cut-off date.

However, the scheme, if it gets the cabinet nod, may not be very beneficial for trucks which are newer than 13 years, according to Prasad Koparkar of CRISIL Research.

The real sops of the scheme would be on account of excise duty and road tax waivers, since the scrap value offered in the VVMP scheme can be availed in the open market as well, the CRISIL said.