Taking a peek into India’s upcoming Vehicle Scrapping Policy

The Indian government in its 2021 Union Budget announced a series of bills & policies to help curb the burgeoning problem of air pollution. Schemes like voluntary Vehicle Scrapping Policy and Green Tax are part of India’s Go-green drive.

Finance minister Nirmala Sitharaman, during the Union Budget speech in February 2021, announced that the government will introduce a voluntary vehicle scrapping policy to incentivize people to replace their old vehicles with new ones. She didn’t disclose the finer details of the policy then but now after two months, we’ve got a clearer idea of what it is and what it means for the different sections of vehicle owners. So let’s have a look into it!

What is it?

The new Vehicle Scrappage Policy as described by Nitin Gadkari, Union Road Transport and Highways Minister, is India’s path to a greener, fuel-efficient and environment-friendly future. It has been rolled out to promote and motivate people to switch to environment-friendly alternatives like Electric Vehicles and Public Transport.

Under the policy, personal vehicles will be required to undergo an automated fitness test after 20 years and the same is directed for commercial vehicles after 15 years. An important thing to note is that the entire policy is voluntary, and a car over 20 years old does not automatically get scrapped, but it would have to undergo a mandatory fitness test and would also attract additional fees & taxes.

That means the classic and vintage cars owners don’t have to worry. They can keep their vehicles preserved as long as they want. Well, no one can deny that we make a bond even with cars. Especially the motorheads. So all of you who’re still not ready to let go of your first vehicle, the new policy is not here to separate you from your love. Proud owners of the old-gen 800s, Altos and Santros can relax. However, you would have to pay some Green Tax on the old vehicles.

Green Tax?

The Green Tax rate will depend on the type of vehicle and engine fuel (petrol/diesel). It will be applicable at the rate of 10-25% of road tax on transport vehicles older than 8 years, meanwhile, personal vehicle owners get a relaxation in the period.

Personal vehicle owners will be charged a Green Tax at the time of the renewal of the Registration Certificate after 15 years. Diesel vehicles will attract a higher rate than their petrol counterparts. Public transport vehicles will be charged lower taxes, whereas vehicle owners in highly polluted cities like Delhi-NCR will have to bear a Green Tax burden of up to 50%.

“Revenue collected from the Green Tax to be kept in a separate account and used for tackling pollution, and for states to set up start-of-art facilities for emission monitoring” informed the Ministry of Road Transport and Highways through a press release.

Hybrid, Electric, CNG, LPG, ethanol vehicles are exempted from Green Tax as they leave a smaller carbon footprint, compared to their conventional-fuel consuming counterparts.

Need for this policy? – Environmental Challenges

While announcing the Centre’s new scrapping policy, the Union Minister of Road Transport & Highways, said that the move is aimed at reducing carbon emissions. It is an understanding that older vehicles (above 15 years to 20 years) cause 10 to 12 times more pollution than the newer ones.

Clean air campaigners have been strongly demanding for taking older vehicles off-road for a long time. However, many say that the scrappage policy alone cannot serve that purpose. A lot of other policy initiatives need to go hand in hand (But hey, one step at a time is better than taking no steps at all, right?).

According to the statistics, there are around 51 lakh light motor vehicles or LMVs older than 20 years in India. Around 34 lakh vehicles are LMVs older than 15 years, while the number of medium and heavy commercial vehicles more than 15-year-old stands at 17 Lakh.

Infrastructure

The government aims for at least 718 vehicle fitness testing centres to be set up in the country, with the target of one in each district. The Ministry of Road Transport and Highway also plans to promote the model inspection and certification worth Rs 17 crore in all states. As per reports, the ministry has already sanctioned 26 such model centres. The centre has requested the state governments to provide land for free to these fitness centres. However, the states have not reacted to it yet.

Apart from the fitness centres, this policy would require a large number of scrapyards across the country. Identifying locations and obtaining green clearances for these scrapyards will be another challenging task.

CERO, a collaboration between Mahindra Accelo and MSTC (a government of India enterprise) is currently India’s only authorised recycler for motor vehicles. It has its recycling centres at Delhi-NCR, Pune and Chennai. It also operates collection centres in Mumbai, Bengaluru, Hyderabad, Ahmedabad, Chandigarh and Jaipur.

Additionally, Tata Motors Ltd is also planning to build vehicle scrap yards in Howrah, Karnal, Hyderabad and Greater Mumbai along with its dealers. According to the reports, Tata Motors may not invest directly in them but will provide technical know-how and expertise for these dismantling units

Benefits and Rebates?

As per the latest draft notification, buyers who scrap their old car can gain a 25% road tax concession on the next one, for a period of 15 years from the date of registration. Furthermore, buyers will not be required to pay the registration fees for their new car. This proposal from the Centre, however, still needs the states’ approval. This could be tricky though, as states are already griping about delayed GST compensations from the Centre and have lost out on big revenue due to the COVID-19 pandemic. They are thus likely to seek some compensation from the Centre, which is also cash strapped.

Additionally, car manufacturers are also advised by the central government to provide a discount of 5% on buying a new vehicle against a scrapping certificate.

So is it a win-win for everyone?

The Union Road Transport and Highways Minister, Nitin Gadkari, termed the policy as a “win-win” proposal for all. However, the industry, transport associations and vehicle owners have raised their concerns. The All India Confederation of Goods Vehicle Owner’s Association and Kerala Lorry Owner’s Federation has approached the Transport Ministry calling the recommendations of the policy as “not practical”.

As per the media reports, both bodies have said that around 50% of the goods carriers in India would be required to be dismantled if the government proceeds with the new policy. They also asserted that scrappage would never be a practical option for thousands of vehicle owners.

Well, I would have usually agreed with this on any other day, but here I would beg to differ. As per Transport Ministry’s data, India has 17 lakh medium & heavy commercial vehicles older than 15 years that are without any VALID fitness certificate. Needless to mention again, such vehicles are responsible for 10 to 12 times higher carbon footprint while they’re on the road compared to newer vehicles. So, given the alarming condition of the air pollution throughout India, this is a drastic step which was needed to be taken.

Timeline

The Government of India has set a rigid timeline to roll this policy with its full effects as early as possible. The rules for fitness centres and scrapping centres will come into effect from October 1, 2021. While the scrapping of government and PSU vehicles older than 15 years will start by April 1, 2022, the deadline for implementing mandatory fitness testing of heavy commercial vehicles has been set for April 1, 2023. The same has been decided for other vehicle categories (including private vehicles) by June 1, 2024.