Should Government offer incentive for replacing old vehicles?

The Indian auto industry has plummeted in the last few months and badly needs help in terms of new policy to boost its performance. Of late demand for a new scrappage policy to take the aging vehicles off the roads has been intesifying. In a presentation made to the Parliamentary Standing Committee on industry headed by Janata Dal (United) MP K.C. Tyagi, Society of Indian Automobile Manufacturers (SIAM) recommended that customers should receive concessions of up to Rs. one lakh in taxes if they sell vehicles older than 15 years with cut off date 1996. SIAM further said that in the first phase India's eight largest cities should be covered and could see as many as 8.9 million passenger vehicles and 1.47 million commercial vehicles being scrapped. The Industry body also pitched to the government that doing this will generate Rs.31,332 crore of revenue for the government through taxes in these eight cities. Recently, the proposal attracted opposition from road transport and highways ministry which recommended that fitness test results should be the basis for phase out and not the age.