Union Road Transport and Highways minister Nitin Gadkari has asked the Environment, Forest and Climate Change Ministry to share the subsidy burden for replacing commercial vehicles that are older than 15 years by tapping into funds earmarked for compensatory afforestation.

“I met the minister for environment and forests (Anil Dave) yesterday and told him that since scrapping old commercial vehicles will reduce 65 per cent of the country’s pollution, then funds under CAMPA (Compensatory Afforestation Fund Management and Planning Authority) can also help fund this,” Mr. Gadkari said.

Interest subsidy

He said the Environment Ministry can help subsidise the interest payable on loans for new heavy commercial vehicles under the proposed policy for scrapping polluting automobiles.

The CAMPA, set up in 2009, currently has a corpus of about Rs.40,000 crore earmarked explicitly for compensatory afforestation projects to replenish forests lost to industrial and infrastructure projects. The Centre now wants to replace it with a new authority, backed by a new bill that was cleared by Parliament in its monsoon session.

The Road Transport Ministry, which is steering the vehicle scrapping policy, has proposed to the Finance Ministry a framework under which new vehicles bought under the policy would get concessions from the Centre, the state government and the automobile company in addition to the scrap value of the old vehicle.

“We have proposed this in a presentation we made to Finance Minister ArunJaitley three days ago and consultations are still underway. I hope to take the policy to the cabinet for its approval soon,” Mr. Gadkari said, while speaking at the annual conference of the Automotive Component Manufacturers’ Association of India.

In its first phase, the scrapping policy would be restricted to commercial vehicles older than 15 years, which the Minister said account for 65 per cent of the country’s pollution.

“While pollution will come down to that extent, we expect a benefit of Rs.4,000 crore to the Centre and Rs.10,000 crore to the state governments. The auto industry can also expect sales growth of around 22 per cent from this initiative,” Mr. Gadkari said. Automobile players are enthusiastic about the idea not just because it would boost sales, but also because they will be able to access the high-grade metal scrap from old vehicles.

“The vehicle scrapping policy could significantly change the environment for the auto industry, taken together with the other initiatives in the offing such as the transition to BS-VI emission norms by 2020, safety norms that will be the same as Europe in three years’ time and fuel efficiency norms,” said Pawan Goenka, Executive Director, Mahindra& Mahindra.