Why Government is planning to come up with a vehicle scrappage policy

Government planning to come up with a vehicle scrappage policy in near future. And, a cursory view of Maruti-Suzuki’s stock.
It’s the nature’s rule to get rid of the old and make way for the new. If we see this through the commercial lens, we observe that old products get replaced by the new ones based on market’s demand. Sometimes, when the market is not ready for the new product (but that’s the need of the hour) then, the government has to step in and introduce the innovation, or rather impose it upon the market. We’re talking about this today because there’s one such situation on cards.

Road Transport and Highways Minister Nitin Gadkari has recently stated that the policy is drafted and needs clearance from the finance ministry and some other stakeholders. He also said that the policy implementation would be one of the steps to boost the industry as it would reduce production. The policy is aimed at boosting the demand by eliminating the fleet of old polluting vehicles.

What Does This Mean for Auto Industry?

Since last few years, the Bharat Stage norms are being upgraded. It’s also essentially required to control pollution levels. But, due to the lack of a proper scrappage policy, not only the people are confused as to what to do with their grand old vehicles, but so are the automakers. The scrappage policy if implemented soon and effectively, would help clear a lot of clutter. This in turn would boost the demand as well.

A boost in demand is severely required for the ailing auto industry. The lockdown has only made the situations worse. Hence, the policy is sincerely awaited by the automobile manufacturers. But, as the draft has still not been made public, nothing concrete can be said about its futuristic effect.