Dhawal Shah, Director of Metco India, a leading brokerage house for secondary materials such as ferrous and non-ferrous scrap talks to ARW about the upcoming auto scrappage scheme and for it to work, India needs to unite.
Dhawal, with the scrappage scheme now imminent in India, are you confident that the planning preparations made will make the task ahead a success?
In my opinion, this policy, once implemented, will be a watershed moment for the Indian automotive industry. The draft has been on the drawing board for over 5 years now, and finally, it seems to be ready to be rolled out.
Like every other new landmark policy introduced by this government for e.g. GST, NCLT, Tax Digitalisation, etc.. it goes through a period of initial glitches, and turbulence. But eventually, once the positives are realised, acceptance from people seeps in.
For the scheme to be a success, there is much reliance on the general public to participate. What is being done to encourage this, and what efforts are being made to ensure the public understands this initiative’s importance?
We are a multi-layered society that has traditionally seen vehicles as an asset class. The government has used the word “voluntary” in its initial declaration of this policy. However, they now want the public to be educated about the environmental impact that old, polluting vehicles have. Though it may take a long time for people to give up their old vehicles on account of the pollution issue, they may be persuaded to scrap their vehicle if the value proposition is right. At this moment, the government has announced a 5% discount from car makers/dealers against new purchases to those buyers who opt to scrap their old vehicle.
With such a large undertaking in a country the size of India, what are the possible pitfalls that lie ahead for the scrappage scheme, and how can they be avoided?
One of the challenges is ensuring compliance. As mentioned before, the scrappage is a voluntary programme. However, the periodical fitness check of your car will be a mandatory requirement. So as your car gets older, costs will increase in terms of registration, insurance, etc… The central and state governments will have to collectively ensure that the fitness centres do their jobs properly whilst certifying, and also the traffic police are very alert in apprehending violators whose vehicles have not got the fitness test done.
Do you think that attitudes towards the scrappage scheme are different between urban and rural areas?
The urban crowd, being more aspirational, may see a more proactive approach initially. However, ultimately it would depend upon the overall value fetched against giving up their old vehicle for scrapping, and the incentives against the purchase of a new vehicle; Fundamentally, this will decide the success of the programme.
How important is it that there is unity across the whole country to make the scrappage scheme a success?
The automotive industry contributes around 7-8% to our GDP. It is a big revenue churner for state and central government and in the form of taxes and levies. It would be necessary that the centre and all Indian states remain fully coordinated, and act in unison to see the success of this programme. Political divide should not occur, either in the form of rules or their implementation.