Finance Minister Nirmala Sitharaman today said that increased registration fees for vehicles will be deferred and ban on purchase of new vehicles by government departments will be lifted to spur growth.

In addition, allowing higher depreciation on vehicles bought before end of this financial year and boosting liquidity for purchase of vehicles were some of the measures announced by the Finance Minister as part of a three-part reform process out to be laid out over the next two weeks.

“A lot of people were anguished by the hike in registration fees. We have deferred the (hiked) registration fee till June 2020. In order to boost demand Government shall lift the ban of purchase of new vehicles to replace all old vehicles by government departments. Government will encourage replacement of old vehicles within government departments”, said Sitharaman.

Higher depreciation of 30 percent as against the existing 15 percent on vehicles purchased before March 31, 2020 will make corporate and fleet buyers to pre-pone purchases of vehicles.

“Since inventories are piling on with car manufacturing companies an additional 15 percent depreciation on all vehicles to increase to 30 percent acquired during the period from now till March 31, 2020 will benefit from this”, said Sitharaman.

The FM also said that vehicles bought before March 31, 2020 will be allowed to ply for the entire duration of their registration period without facing any ban.

Passenger vehicle sales have fallen for nine consecutive months amid a weak economic environment despite high discounts and amid uncertainty on what the government's push on electric vehicles would mean for conventional combustion engine vehicles.

“The automobile sector has been meeting us, both as an industry and also individually. I am glad to announce the response we have given to them in this matter. The BS-IV vehicles was a big issue. There was confusion because government wanted to make an announcement as regards encouraging electric vehicles and batteries. That confusion we want to dispel completely”, said Sitharaman

“BS-IV vehicles which are purchased up to March 31, 2020 will remain operational for their entire period of registration. It will not be that from 2020 BS-IV will be off the roads. As long as their registration is on they will be as good as any other vehicle”, added Sitharaman.

The Finance Minister also mentioned plans of bringing a scrappage policy but the absence of infrastructure to dispose off older vehicles has restricted the efforts.

Nitin Gadkari, minister for road transport and highways, said at the Mindmine event in Delhi today that the draft for a scrappage policy has been submitted to the cabinet for approval.

Guenter Butschek, CEO & MD, Tata Motors said, “Tata Motors welcomes the comprehensive set of actions laid out by the government and believes measures to improve liquidity, drive growth and reduce cost of ownership of the vehicles, should help the industry get back on track. We thank the government for hearing the concerns of the industry empathetically and doing their best under current conditions."

Venu Srinivasan, Chairman, TVS Motor Company said, “These measures will provide the immediate relief that the industry was seeking. The promptness of this government’s response is reassuring for not just industry, but for the common man as well because it’s putting liquidity into the market and easing the squeeze on the small and medium sector.”

Martin Schwenk, MD & CEO, Mercedes-Benz India said, “We welcome the firm measures announced by the Finance Minister today. The host of positive measures announced has given the much required boost to the auto sector and also sets a clear roadmap. We are confident that these measures once implemented, will support growth and drive demand for the auto sector.”