Transport ministry's proposal to scrap vehicles sold before March '05 comes to halt

Recently, the road transport ministry submitted a Voluntary Vehicle Fleet Modernisation (V-VMP) concept which proposed to get around 28 million vehicles registered before March 31, 2005 and below BS IV standards off the road. However, the plan has come to a halt as the revenue department has turned down its proposal to offer an excise rebate to the owners who voluntarily surrender their old vehicles.

Under this concept, the ministry had proposed a discount on excise of up to 50 per cent while buying a new car (depending on the category of the old and new vehicle), a fair amount of money for the scrap and discounts from automobile manufacturers for customers buying cars under this scheme. The ministry estimated that all of this would bring down the on-road cost of a new vehicle by 8-12 per cent.

According to the concept note on the V-VMP, this plan has the potential to bring down vehicle emissions by around 25-30 per cent as well as reduce oil consumption by close to 3.2 billion litres per annum. According to the note, this reduction in oil consumption will help save close to Rs 7,000 crore in oil import.

The finance ministry feels that the proposed excise rebate would be the wrong way to go about this, as it would benefit the buyers of more expensive vehicles more than it would those that are buying the more affordable ones. Instead, the ministry is considering offering a cash incentive to those surrendering their cars, with a cap on the maximum amount that can be given for a car.

There are, of course, criticisms from several parties which state that this whole plan is just a big ruse to boost automobile sales in the country and not a means to curb pollution and save oil. This policy is estimated to boost the automobile industry's turnover from around Rs 4.5 lakh crore to close to Rs 20 lakh crore within five years.

This not only improves the GDP as it employs more people but will also save on foreign exchange by providing the steel industry with quality scrap from the old vehicles. Additionally, the cars that would be plying the roads will be equipped with modern safety technologies which could help reduce accident rates in the country.