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New Vehicle Scrapping Policy: End of the Road

In a move to boost the automobile sector, which has been reeling under the impact of Covid-19, and to reduce pollution, the centre has come up with a policy to scrap old vehicles and reuse them.

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On March 18, Union Minister of Road Transport and Highways Nitin Gadkari introduced a new vehicle scrapping policy in the Lok Sabha. It aims at creating an eco-system to phase out old, unfit and polluting vehicles.

As per the new policy, in case of failure to get a fitness certificate, commercial vehicles will be de-registered after 15 years. Private vehicles will be de-registered after 20 years if found unfit or in case of a failure to renew registration certificates. Vintage cars will be exempted from this policy, and separate guidelines will be formulated to regulate them.

According to the policy guidelines, after the end of the 20-year or 15-year period, vehicles will have to undergo a fitness test and acquire fitness certificates in order to be allowed on the roads. Each fitness test will reportedly cost Rs 40,000, which is in addition to road and green tax every private vehicle owner will have to pay while mandatorily renewing the registration after the 15-year period.

The minister said: “There are four major components of the policy. Apart from rebate, there are provisions of green taxes and other levies on old polluting vehicles. These will be required to undergo mandatory fitness and pollution tests in automated facilities. Automated fitness tests will be set up under the public private partnership mode, while the government will assist private partners and state governments for scrapping centres. Driving such vehicles that fail to pass automated tests will attract huge penalties and they will also be impounded.”

The new regulatory regime, aimed primarily at cleaner emissions, fuel efficiency and better safety, will start with mandatory testing of heavy commercial vehicles from April 2023 and for other categories, in a phased manner, from June 2024. “The scrapping of the vehicles will help reduce the population of old and defective vehicles, lead to a 25-30% reduction in vehicular air pollutants and improve road safety. Further, recyclable materials like plastic, steel and copper could be reused and thus, reduce the costs of vehicles. The scrapping of old vehicles will also boost vehicle sales in the country, which will in turn provide a thrust to the automobile industry,” Gadkari said.

The government also proposed that all vehicles of the central government, state governments, municipal corporations, panchayats, state transport undertakings, public sector undertakings and autonomous bodies with the Union and state governments may be de-registered and scrapped after 15 years from the date of registration. The tentative date for scrapping these vehicles over 15 years is April 1, 2022.

The scrap value will be around 4-6% of the ex-showroom price of a new vehicle and the government will advise manufacturers to provide a discount of 5% on new vehicles if the buyer produces a scrapping certificate. State governments will also be advised to offer a road-tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles. With a simplified registration process through a single window, the scrapping facility shall have to comply with environmental and pollution norms and with all applicable acts of law. The scrapping centres will have adequate parking facilities, de-pollution equipment for air, water and sound pollution and facilities for hazardous waste management and disposal.

The policy is touted as a major step to boost the Indian automobile sector, which has been reeling under the adverse impact of Covid-19. “It would lead to a 30% boost to the Indian automobile industry with a turnover to Rs 10 lakh crore in the years to come from the present Rs 4.5 lakh crore,” the minister said. The rules for fitness tests and scrapping centres will be tentatively notified by October 1 this year. For heavy commercial vehicles, mandatory fitness testing will commence on April 1, 2023. Similarly, mandatory fitness testing will be carried out in a phased manner for other categories from June 1, 2024.

India has 17 lakh medium and heavy commercial vehicles that are older than 15 years without any valid fitness certificate, 51 lakh light motor vehicles older than 20 years and 34 lakh light motor vehicles older than 15 years, according to the transport ministry. The average age of commercial vehicles is over 10 years and of private ones, 10-15 years.

The advantage of this policy is that scrap materials will get cheaper and that will reduce the production cost of vehicle manufacturers. It is also expected to provide employment to about three crore 70 lakh people in the automoblile sector. In the new fitness centers, 35,000 people will get employment and an investment of Rs 10,000 crore will be pumped in. The government treasury is expected to get around Rs 30,000-40,000 crore through GST from this policy.

In January, the government said that it plans to impose a green tax on older polluting vehicles soon in a bid to protect the environment and curb pollution, while vehicles like strong hybrids, electric vehicles and those running on alternate fuels like CNG, ethanol and LPG will be exempt. The revenue collected through the green tax will be utilised for tackling pollution.

On July 26, 2019, the government proposed amendments to motor vehicle norms to allow scrapping of vehicles older than 15 years in a bid to spur adoption of electrical vehicles. In May 2016, the government had floated a draft Voluntary Vehicle Fleet Modernisation Programme that proposed to take 28 million decade-old vehicles off the road.

In October 2018, the Supreme Court asked the Delhi government’s transport department to identify and impound 15-year-old diesel and 10-year-old petrol vehicles on Delhi-NCR roads, which it deemed contributed to the pollution problem. The Court further directed that a list of such vehicles should also be put on the website of the Central Pollution Control Board and the transport department. In 2017, the National Green Tribunal also banned 15-year-old diesel and 10-year-old petrol vehicles from Delhi-NCR.

A study in 2016 by the Central Pollution Control Board and a  German development company estimated that more than 87 lakh vehicles reached the end-of-life  status in Delhi-NCR by 2015. Till 2025, this  number is expected to be 2.18 crore. Two-wheelers account for about 80% of it.

In March 2018, the age of vehicles to be scrapped was increased to 20 years and the implementation date was set to April 2020.

Scrappage policy refers to the provision of financial incentives to the owners of vehicles to get them to scrap outdated models and replace them with newer vehicles. A car scrappage scheme was introduced in Germany on February 13, 1999, and then in France and Italy. Following a record fall in car sales in the UK and associated redundancies, a scheme was introduced in the 2009 UK budget on April 22, 2009, by then Chancellor of the Exchequer, Alistair Darling.

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At the end of their useful life, vehicles have value for their spare parts and this created a vehicle-dismantling industry. Vehicle recycling is also there to some degree, but in recent years, manufacturers have become involved in the process. A car crusher is often used to reduce the size of the scrapped vehicle for transportation to a steel mill. Currently, 75% of the materials can be recycled, with the remaining ending up in a landfill. As the most recycled consumer product, end-of-life vehicles provide the steel industry with more than 14 million tons of steel per year.

By Shivam Sharma with India Legal Bureau

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