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India: Vehicle scrappage policy to reduce cost of electric vehicles

Prime Minister Narendra Modi on August 13 launched the Voluntary Vehicle Fleet Modernisation Programme or the automobile scrappage policy. The Prime Minister had said the vehicle scrappage policy will bring in investments of around Rs 10,000 crore.

Talking about the ship recycling industry that exists at Alang in Bhavnagar district of Gujarat where 8,300 ships have already been broken and recycled, Modi said that in this entire region, the infrastructure and skilled manpower exists. So after ships, Alang can also become a big hub for scrapping vehicles. Bhavnagar also has 80 odd units that operate induction furnaces and 60-65 steel re-rolling mills which currently recycle scrap salvaged from ageing ships at Alang Shipbreaking yard.

The Minister of Road Transport & Highways on August 17 said the newly launched Voluntary Vehicle Fleet Modernisation Programme or the vehicle scrappage policy will help reduce the cost of manufacturing electric vehicles in India. PM Modi said that India had to import ₹23,000 crore worth of scrap steel during the last year as scrapping is not productive, and the country cannot recover energy and rare earth metals from scrap.

Saket Mehra, Partner and Automotive Sector Leader, Grant Thornton Bharat. “One of the key opportunities that will emerge from the vehicle scrappage policy will be for the metal recycling business. It will also to an extent reduce the cost of production. Steel is a crucial component for automobile manufacturers, and its price has been growing up to almost 30 per cent in the last six months.”

The new policy would channelise the used materials — copper, aluminium, steel, rubber and plastic — back into production. “We aim for maximum recovery up to 99 per cent. This will increase the availability of materials and reduce costs by up to 40 per cent for raw materials, thereby fuelling India’s competitiveness globally,” said Nitin Gadkari, adding that improved sales globally will fetch spill-over benefits for the Centre and States in terms of projected GST earnings of ₹40,000-50,000 crore and ₹30,000-40,000 crore, respectively.

The minister said that battery recycling, which will be done through the new scrappage policy, will help bring down the cost of electric vehicles and will also help India develop Lithium-ion batteries locally.

Talking about the scrappage policy, Gadkari said that the policy will increase sales of new vehicles, adding that the government has requested automobile manufacturers to give a 5% discount on new vehicles bought against scrapping old vehicles.

Under the vehicle scrappage policy, testing and scrappage centres will be set up in all districts across the country using the public private partnership (PPP) model.

The aim of the policy is to provide incentives to owners of old and polluting vehicles to take them off the road and scrap them. Commercial vehicles that are over 15 years old and personal vehicles that are over 20 years old will become eligible for scrapping.

Under the policy, the centre had made it mandatory for heavy commercial vehicles to be scrapped if they do not conform to the fitness level prescribed under the rules from 2023 onwards, Giridhar Aramane, secretary in the road transport and highways ministry had last week said. Similarly, the centre plans to make vehicle scrapping mandatory for personal vehicles from June 2024 onwards.

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