(Bloomberg) -- India will offer tax breaks to owners who hand in their old vehicles for recycling as part of a program that's aimed at removing millions of gas-guzzling cars and pollution-belching trucks and buses from the roads.
Road-tax rebates of as much as 25% for new cars for personal use and 15% for commercial use will be offered to consumers, Nitin Gadkari, the minister of road transport and highways, said in parliament Thursday. The nation's so-called cash-for-clunkers plan was outlined in the Feb. 1 budget but details weren't given at that time.
Automakers are also being urged to offer 5% discounts off new cars if a person offers up their old one. Other incentives include waiving the registration fee for new vehicles and setting a scrap value for old cars that's at least 4% of a fresh model's price.
India's carmakers are counting on the plan to boost sales, which have been smashed by a widespread fall in demand amid the pandemic-induced recession. Mahindra & Mahindra Ltd., India's largest SUV maker, last year reported its first quarterly loss in nearly two decades, and Maruti Suzuki India Ltd. posted its first-ever loss in the three months ended June 30.
Read more: India's ‘Cash-for-Clunkers' Needs Strong Incentives to Succeed
It should also help the environment. The South Asian nation has some of the worst air quality in the world, and the toxic smog costs the country as much as 8.5% of its gross domestic product, according to World Bank calculations, as well as shortening the lives of citizens.
The push to get old cars off roads will also mean that autos more than 20 years old and commercial vehicles more than 15 years old will need to undergo fitness tests. If the fitness certificate isn't kept current, those vehicles will be deregistered. It will also cost more to get a fitness certificate for cars more than 15 years' old, plus vehicles used by various government agencies will be automatically de-registered after 15 years.
India does have a problem with old cars. Data show that 5.1 million light motor vehicles are older than 20 years and 3.4 million light motor vehicles are older than 15 years. What's more, around 1.7 million medium and heavy commercial vehicles are older than 15 years and don't even have a valid fitness certificate.
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