Old trucks will be off the roads after GST rollout; Rs 160 billion losses expected

Goods and Service Tax (GST) roll out will cost the government up to Rs 16,000 crore because of its ambitious programme to take old, polluting trucks off-road under the Voluntary Vehicle Modernisation Programme (V-VMP).

Earlier, the government was planning to offer excise rebates to incentives owners to junk old vehicles for a new one, but now with excise duty coming in under the overarching framework of the new tax system expected to take effect next fiscal year, the government is now looking at doling out cash incentives of Rs 50,000-60,000 per heavy vehicle.

"As per the proposal, cash incentives of Rs 50,000-60,000 per vehicle is planned to be given to owners replacing old polluting trucks. Heavy commercial vehicles constitute 2.5 per cent of the vehicle population but comprise 65 per cent of vehicular pollution and consume 70 per cent of fuel. It is the first category which is being targeted to create maximum impact on pollution," a senior road transport ministry official told ET.

However, the proposal will require an acceptance from a committee of secretaries from roads, steel, finance, heavy industries and environment ministries.

The scheme is estimated to affect 2.7 million trucks over 15 years old, vehicle registration data available with the roads ministry showed. To be sure, some of these vehicles may have reached the end of life and be defunct by now.

"The incentives will be given for 2-3 years after which regulations will be put in place to mandatorily scrap end-of-life vehicles," the official further said.

The incentives were expected to reduce the cost of a new vehicle for the buyer by 8-12 per cent.

As per current voluntary vehicle modernisation scheme, vehicles bought before March 31, 2005, or those below BS IV emission standards, would be eligible for incentives if those were scrapped and replaced by new ones.

The government estimates the V-VMP programme may take 28 million including commercial and passenger vehicles off the road.