Scrappage scheme would give demand a boost: Ashok Leyland MD & CEO

Ashok Leyland MD, Vipin Sondhi
An incentive-based scrappage scheme for commercial vehicles older than 15 years, coupled with a rebate in goods and services tax (GST), road tax or registration charges, could help give a boost to demand, says Vipin Sondhi, managing director & chief executive, Ashok Leyland Limited.

The commercial vehicle sector, which was already struggling before the coronavirus outbreak, had now come to a grinding halt, he said. Commercial vehicles are a lifeline for any country’s economy, as they carry goods and are an integral part of public transport, he added. "It is imperative that the demand for commercial vehicles be triggered. An incentive-based scrappage scheme (for commercial vehicles older than 15 years), with incentives in the form of a rebate in GST, road tax or registration charges would help give demand a boost," he said.

Once the lockdown is eased, freight demand would start picking up. At this time, an incentive-based scrappage policy would help customers acquire new trucks at lower prices. These new trucks with a lower total cost of operation would improve their operational efficiency, profitability and cash position. Also, being BS-VI-compliant, these would be less polluting, he added.

Today, 15-20 per cent of the trucks on roads are older than 15 years. Even if these were replaced with new trucks in the next 3 to 4 years, that would generate a healthy demand for new trucks and help the commercial vehicle industry partly come out of its current slump.

The long-haul multi-axle segment of the CV industry would likely benefit more if this scrappage policy was introduced. But, of course, it would depend on the exact modalities of the scrappage policy, including incentives, said Sondhi.

The customer would benefit from a more efficient fleet of vehicles with an overall lower total cost of ownership. It will create an upward spiral of growth for the freight industry and the overall economy, as commercial vehicles were core to nation-building, he added.

The Society of Indian Automobile Manufacturers earlier called for a temporary GST rate cut and introduction of an incentive-based vehicle scrappage policy to revive the auto sector, battered by a prolonged slowdown and now the coronavirus pandemic.

Reports quoting a Central Pollution Control Board (CPCB) study stated that about nine million vehicles plying on Indian roads were more than 15 years old and often had 10 times more tailpipe emission than the current norms permitted.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel