On top of the scrap heap (On Vehicle scrappage policy)

Source: Business Standard

Relevance: On vehicle scrappage policy

Synopsis: Vehicle scrappage policy is a step in the right direction, but its success is predicated on fulfillment of several conditions. A look at some of such factors.

Background

• Read here: PM launches scrap policy for unfit vehicles 

Note: Please go through above articles before moving forward.

Issues/concerns

1. Cooperation of the states: The Motor Vehicles Act falls in the Concurrent List of the Constitution, so some of the tax breaks announced in the policy will require the cooperation of the state governments, which levy annual or lifetime taxes on motor vehicles, and it is as yet unclear whether states are on board.
2. Lack of infra: India lacks the necessary eco-system, in the shape of automated fitness centers or sufficient scrapping centers. Here, too, the cooperation of the states would be necessary. The creation of large-scale scrapping centers may be uncertain, too.
   • Though a vibrant raddi industry exists for old vehicles, it is largely unorganized and piecemeal. An organized business linked to the policy will require large-scale logistics and real estate, which could limit the business to larger enterprises rather than micro, small, and medium enterprises.

Way forward

For the policy to work, it is critical for the government to come up with clear incentives for scrapping centres so that they are up and running before the policy comes into effect. Without these, the policy, which has the potential to generate a decent level of unskilled-level employment, will end up like the e-vehicles policy, where the lack of recharging centers has constrained the expansion of the industry.