by rajeev singh sumit mishra and saket mehtaindia is expected to become the third largest by 2026 in spite of a scrapping policy the scrapping of vehicles is not yet commensurate with the growth in production of the new ones it is mainly because of the unorganised and smallscale nature of the scrapping sector this has led to an increase in the number of obsolete vehicles also called endoflife vehicles elvs which either rot on roads or are disposed of in an unscientific manner risking public health and environment according to a central pollution control board cpcb study the number of obsolete vehicles is expected to grow from 87 million in 2015 to 22 million by 2025 creating more challenges for the country advt the voluntary vehicle fleet modernisation programme or the vehicle scrappage policy is expected to help reduce pollution generate demand for new vehicles and create a new business area of scrapping and reclaimed metals and other materialsthe policy is having a good mix of incentives for new vehicle buyers and disincentives for old vehicle owners and so it is likely to promote vehicle scrappage and create demand for new vehiclesthe various incentives and disincentives proposed under the vehicle scrapping policy 2021 are presented belownew vehicle demandglobal experience suggests that policy can act as a tool to stimulate auto demand the policy being balanced is expected to create a positive effect on buyers to go ahead with scrapping of their old vehicles and buying of new ones and once the benefits are realised it is expected to create a multiplier effect leading to the desired impact on the sale of new vehicles in the countryas per the cpcb estimates the number of obsolete 4wheelers in the country by 2025 will be passenger vehicles lmv 28 million commercial vehicles mcv hcv 128 millionthe estimated number of obsolete vehicles is high and so is the potential but the success of the policy will hinge on commercial benefits from scrappage vis vis the current practices of resale and its strict enforcement an example of the commercial benefits for a new passenger vehicle buyer who also avails scrappage benefits for old vehicles is worked out belownew midmarket car petrol inr 1000000 exshowroom mumbai advt old car massmarket petrol inr 400000 exshowroom mumbai weight assumed 1000 kgbased on the example it can be seen that the actual benefit to the buyer can be in the range of inr 54500 assuming a certain scenario to a maximum of inr 98100 depending on the actual incentives extended by the state government and the vehicle manufacturer the benefit range being large could be a make or break for execution of the vehicle scrappage policy though the policy benefits are good a lot depends on the state government and oemsrecycled steelrecycled steel is used in the manufacturing of automobiles and a regular passenger vehicle uses about 25 recycled steel out of its total requirement hence there is good demand for recycled steel in automobile manufacturing