India’s automobile scrappage policy may prove to be a non-starter because of limited incentives offered scrapping vehicles, according to a report by rating agency Crisil.
The rating agency report said that poor cost economics for trucks and lack of “addressable volumes” for other segments will act as a dampener as regards the policy taking off.
However, though the volume of buses, passenger vehicles and two-wheelers offered for scrappage is expected to be limited, the impact of the policy on new commercial vehicles sales could be sizeable, Crisil said.
Under the proposed vehicle scrappage policy approved by the government, a monetary value of four to six percent of the showroom price of the vehicle will be offered against the scrapped vehicle and an additional five percent discount on the subsequent purchase of a new vehicle.
There will be additional 25 percent discounts on road tax and registration charges.
According to the Crisil report, in the bus segment, many buses are owned by state transport departments and have a life of over 15 years. But buses used by schools and the tourism industry do not have a life beyond 15 years and so the bulk of buses of state transport departments will be outside the ambit of the scrappage policy.