Deloitte moots SPV to retire older vehicles

Deloitte, Haskins & Sells, a leading firm of management consultants, after studying the trucking industry in India, has recommended the formation of a special purpose vehicle (SPV) to manage and administer a voluntary retirement scheme for trucks (VRST).

The plan forms part of a study that the firm was asked to conduct on modernisation of the Indian trucking industry by the two apex bodies of transporters.

The bodies -- the All India Motor Transport Congress (AIMTC) and the All India Confederation of Goods Vehicles Owners' Association (AICGVOA) -- have earlier constituted an advisory committee on goods transport, and Deloitte, Haskins & Sells were mandated by the advisory committee to study the industry with a view to develop a strategy to modernise the country's ageing fleet.

The recommendations by Deloitte have been accepted by the panel.

The recommendations include formation of a SPV to manage and administer a voluntary retirement scheme for trucks.

The SPV will be assigned the task of raising resources for the scheme from all the stakeholders of the road transport industry, such as truck and component manufacturers, banks and other funding bodies such as World Bank and International Monetary Fund.

Under the scheme, trucks of 15 years and more vintage will be bought, their registration cancelled, and will be sold later as scrap through a process of auction.

The amount realised through the auction will be given to the truck owner. In addition, a specified amount will also be given to the owner as further incentives out of the contributions received by the scheme.

Approval from the prescribed authority under section 35 AC of the Income-Tax Act will also be sought for the purpose. The scheme, if approved, will permit contributors to the fund to enjoy a deduction of a like amount from taxable income.

The domestic truck industry is experiencing a tough time with rising costs, lower freight realisations and the recent court ruling putting a ban on trucks over 15 years old from plying in Mumbai and Delhi.

The advisory committee constituted for finding an alternative approach for the modernisation of the trucking industry has advised the apex transporters associations to act on the recommendations of the report by forming special purpose vehicle (SPV) and the truck modernisation fund.

The success of SPV depends on its ability to co-opt all the leading stakeholders under one umbrella and persuade them to release appropriate contributions holding a long-term beneficial view for themselves and the industry as a whole.

A worthwhile return on the contributions can be realised within a period of three years.

The committee has made another important suggestion, that the local associations affected by the ban on entry of 15-year old trucks into Mumbai and New Delhi should not approach the courts on the basis of these developments and seek a moratorium on the implementation of the ban order.