Scrappage scheme can boost commercial vehicle sales by 65 per cent : Crisil

Mumbai: The voluntary vehicle modernisation programme (V-VMP) or the scrappage programme announced by the transport ministry can boost commercial vehicle (CV) sales by a cumulative 65 per cent between fiscals 2018 and 2020, over (over sales in fiscal 2016, says report. Incremental sales can reach 4.4 lakh units during this period, a report by Crisil said, adding fiscal 2016 sales stood at 6.8 lakh units or worth Rs 66,500 crore.

"The V-VMP scheme can lead to incremental sales of 4.4 lakh CVs (primarily MHCVs) worth Rs 66,000 crore, a cumulative growth of 65 per cent during this three-year period,"Crisil said in a report. If implemented, around 2 lakh CVs would get scrapped and replaced in the normal course through the three fiscals, given the current junking rate of around 67,000 units annually. Therefore the total vehicles opting for the scheme will be 6.4 lakh. "Over 85 per cent of the incremental sales will be of medium and heavy trucks because of their lifespan of 20 years.

So many of them bought before the March 2005 cut-off date for the V-VMP scheme would still be plying," the report said. Small and medium commercial vehicles and tractor- trailers have a similar lifespan, but those purchased before March 2005 are very small so the impact will be nominal. Similarly, pick-ups, upper light CVs and MHCV buses, which have a lower lifespan of 15-17 years, will have a smaller share in vehicles being scrapped.

Sub-1 tonne CVs would benefit the least given that the segment was created only in 2005 and vehicles would have been purchased after the V-VMP cut-off date. According to Prasad Koparkar, a senior director at Crisil, the government has to consider a cap on the engine capacity differential between scrapped and new CVs bought under the scheme to make the scheme more effective.