Centre Finally Approves the New Scrappage Policy and Green Tax; End of Road for Old Vehicles?

The Weekly Insights | Issue 6

What’s the Deal?

The Minister of Road Transport and Highway (MoRTH), Mr. Nitin Gadkari, has approved a new ‘Vehicle Scrappage Policy’ to incentivize vehicle owner to scrap his/her old vehicle and purchase a new one.

The MoRTH released a statement saying, “The Minister approved the policy of deregistration and scrapping of vehicles owned by Government departments and PSUs, which are above 15 years in age. It is to be notified and will come in effect from April 1st 2022.” The Policy will also include private vehicles.

In case of private vehicles, the government cannot force the owners to sell their cars post 15 years of ownership but will tax them heavily and disincentivize them.

This policy has been bought in to reduce the amount of pollution caused by old vehicles by incentivizing people to buy new vehicles.

The Centre has approved the policy and it is now being discussed and approved by the state governments.

The Journey of Vehicle Scrappage Policy

- In August 2019, Finance Minister Nirmala Sitharaman said that a scrappage policy is in the works.

- In a bid to spur the adaption of electric vehicles the government on 26th July 2019, had proposed amendments of motor vehicle rules to allow scrapping of vehicles older than 15 years.

- MoRTH was rapped by the National Green Tribunal (NGT) in July last year, for the delay in issuing guidelines on the scrapping of vehicles. A NGT bench headed by Chairperson Justice Adarsh Kumar Goel said, “A proper mechanism to set up authorised recycling centres compliant with the environmental norms was an urgent need in view of large number of ‘End of life Vehicles’ (ELV).”

Intended Incentives Under the Policy

- Motorists who decide to scrap their vehicles are expected to get a waiver on registration fees and a road tax discount.

The Proposed Green Tax

- At the time of renewal of fitness certificate, transport vehicles older than 8 years could be charged Green Tax at the rate of 10% to 25% of the road tax.

- Green Tax to be charged on personal vehicles at the time of renewal of Registration Certificate post 15 years of ownership.

- Lower Green Tax to be charged to public transport vehicles, such as city buses.

- Vehicles registered in highly polluted cities will pay a higher Green Tax (50% of Road Tax).

- Depending on the fuel (petrol/diesel) and type of vehicle, differential tax to be charged.

- Strong hybrids, electric vehicles and alternate fuel vehicles (CNG, ethanol, LPG, etc,.) to be exempted.

- Vehicles like tractor, harvester, tiller etc that are used for farming, to be exempted.

- Green Tax revenue to be kept in a separate account and to be used for tackling pollution and for states to set up state of the art facilities for emission monitoring.

What does Vehicle Scrappage Policy Set Out to Achieve?

- To curb air pollution levels in India.

- It will increase the demand for new vehicles, thus aiding the ailing automotive sector in India.

- Older vehicles with outdated safety features would be phased out, allowing people to travel in safer modern vehicles.

- It will push for the use of electric vehicles and reduce India’s oil import bill.

Some Stats on Commercial Vehicular Pollution…

- ­Commercial vehicles that constitute about 5% of the total vehicle fleet, makes for 65–70% of the total vehicular pollution.

- Commercial vehicles manufactured before the year 2000 constitute less than 1% of the total fleet but makes for 15% of the total vehicular pollution.

Therefore, as per the policy, transport vehicles will be charged with the highest Green Tax and at the earliest among all the vehicles, if not replaced in a timely manner.