In major reforms for the ailing automobile sector, Finance Minister Nirmala Sitharaman announced a voluntary scrapping policy to phase out old vehicles, along with allocating Rs 1.18 lakh crore to the Ministry of Road Transport as part of the Union Budget 2021-22 on Monday.
A benchmark
for the economic slowdown in the country, the auto sector has been long-awaiting
concrete steps for its revival or for other steps aimed at boosting consumption
in the country.
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Already in
a slump before the onset of the coronavirus pandemic, India’s auto sector was
dealt a massive blow as the government announced nationwide lockdowns to curb
the spread of the virus.
Market analysts
estimate a daily loss of Rs 2,300 crore in turnover due to the lockdown. Additionally,
from April to June last year, passenger vehicle sales plummeted by 78.43%,
marking decline for a ninth consecutive quarter.
The
Federation of Automobile Dealers Associations (FADA) had earlier presented its
Budget recommendations to help the auto sector, underscoring that the 2021
Budget should focus on incentives more than mandates.
The 2020 Budget
did not introduce a vehicle-scrapping policy nor did it announce guidelines for
reducing GST for automobiles. A vehicular scrappage policy will boost demand
for new vehicles.
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With the Centre announcing a proposal to impose a ‘Green Tax’
on old vehicles, a new scrappage policy can incentivise people to do away with
their older, more polluting vehicles and buy new ones.
The central government has addressed those concerns this year, with the finance minister announcing the introduction of a voluntary scrapping policy. She also said that private vehicles will be subject to a fitness test after 20 years.
Additionally, projects to boost highway infrastructure were also proposed, which include building over 8,500 kilometers of highways by March, 2022.
“Over 13,000 km length of roads at a cost of Rs 3.3 lakh crore has already been awarded under Rs 5.35 lakh crore Bharatmala project of which 3,800 kms have been constructed. By March 2022 we’d be awarding another Rs 8,500 crore and complete an additional 11,000 kms of National Highway Corridor,” she said.
