Crisil finds little traction in auto scrappage policy

Mumbai (Maharashtra) [India], May 15 : The Centre's scrappage policy is unlikely to have freight transporters queuing up to replace old vehicles with new ones, a Crisil research analysis shows.
The scrappage volume of buses, passenger vehicles and two-wheelers will be limited as well.
Crisil said the scrappage policy is much required as older vehicles are 10 to 12 times more polluting than newer ones. India is home to six of the top 10 polluting cities globally and is among the top five polluting countries.
With vehicular pollution contributing nearly 15 to 30 per cent especially in cities such as Delhi, the government is putting greater emphasis on weeding out old polluting vehicles through the scrappage policy.
In March, the Ministry of Road Transport and Highways (MoRTH) announced guidelines for the policy which provides owners ample incentive to scrap their old vehicles as the date to renew their fitness certificate nears.
However, a closer look indicates the scrappage policy will find few takers among owners of buses, passenger vehicles and two-wheelers. But the impact on new commercial vehicle sales could be sizeable based on addressable volume.
Crisil said scrapping of state transport buses depends on state finances. For medium and heavy commercial vehicles (MHCVs) as well, the potential scrappage volume is significant. But the financial burden after replacement increases significantly.
"Hence even in our optimistic scenario, we do not see much traction for the policy from an incremental demand perspective," it said.
"Because of the slim potential, overall volume of vehicles that will require to be scrapped and unviable economics, the scrappage policy may not lead to substantial uptick in the business of scrappage centres."
Also, with limited organised players in this segment, further investment remains a key monitorable.