‘Recent Changes In Proposed Scrappage Policy To Have Limited Impact On Commercial Vehicle Sales’
In ICRA’s view, the recent changes in the proposed policy will significantly reduce the potential population of vehicles eligible for scrappage program thereby reducing the impact on commercial vehicle sales
The recent changes in the proposed much awaited vehicle scrappage policy is going to have limited impact on new commercial vehicle demand in the near term, according to Indian credit ratings agency ICRA.
Under the proposed policy, vehicles older than 20 years (as compared to 15 years earlier) would be eligible for scrappage and the policy will be implemented from April 2020, which coincides with the implementation of BS-VI emission norms. The incentive will be a combination of lower GST rate (i.e. 18 per cent compared to 28 per cent) and discounts offered by OEMs.
In ICRA’s view, the recent changes in the proposed policy will significantly reduce the potential population of vehicles eligible for scrappage program thereby reducing the impact on commercial vehicle sales.
Shamsher Dewan, Vice President and Sector Head of ICRA, said “The proposed policy will limit the potential for new commercial vehicle sales as population of vehicles older than 20 years will be limited and is estimated to be only 150,000-200,000 units. In addition, most of these vehicles are used in rural areas and smaller towns by small fleet operators who operate used vehicles and have limited financial resources to purchase new vehicles.”
“Moreover, around 70,000-100,000 vehicles are scrapped on an annual basis. As a result, the potential impact of the proposed policy on commercial vehicle sales will be limited.”
The vehicle scrappage policy recently received in-principle approval from the Prime Minister’s office and is awaiting approval from the GST council.