The Society of Indian Automobile Manufacturers (SIAM) has sent this and other recommendations to the government for the upcoming Budget 2020-21.
Besides, SIAM has called for a reduction in GST rate on vehicles to 18 per cent from the current 28 per cent.
"... we have urged the Finance Ministry to consider announcing a incentive-based scrappage policy and also increase Budget allocation for ICE bus procurement by State transport undertakings," SIAM President Rajan Wadhera said.
"Increased cost of BSVI may effect demand, hence we have also requested the government to reduce GST rates for BSVI vehicles effective 1st April from 28 per cent to 18 per cent."
On the introduction of an incentive-based vehicle scrappage scheme for removal of old vehicles from the road, the SIAM recommended that incentive be given in the form of 50 per cent reduction in GST and 50 per cent reduction in road tax and registration charges.
It has also recommended abolishment of customs duty of 5 per cent on Li-Ion Cells to allow battery manufacturing to commence in India.
"Allocate budget for procurement of buses by STUs, over the budget allocation for procurement of electric buses under the FAME II scheme," SIAM said in its recommendations.
"Increase depreciation rate for passenger vehicles and two-wheelers to 25 per cent permanently."
According to the industry, these steps can revitalise the sector and place it back on the growth trajectory.
Lately, the auto sector suffers from a consumption slowdown due to high taxation, stagnant wages and a stressed rural sector.
Recent data showed the sector's total domestic sales declined to 14,05,776 units in December from 16,17,398 units sold during the corresponding month of the previous year.
In terms of the calendar year, the 2019 sales decline is the worst ever in the last 20 years.
The off-take of commercial vehicles took a major hit with sales declining 12.32 per cent to 66,622 units, compared to 75,984 units in December 2018.
On the production front, total domestic production last moth stood at 1,816,112 units, lower by 5.22 per cent.
( With inputs from IANS )