Author: Yashvi Sanghani, Unitedworld School of Law, Karnavati University
Minister for road transport and highways while announcing the new Vehicle Scrapping Policy in Lok Sabha, addressed the problem that old vehicles pollute the environment ten times more than fit vehicles and pose a risk to road safety, and the ministry in the interest of a clean environment, and road safety, is introducing the voluntary vehicle-fleet modernization policy (VVMP) or vehicle scrapping policy.
The policy was first announced by Finance Minister Nirmala Sitharaman on 1st February 2021, in her budget speech at the parliament, and is claimed to bring transformational changes in the automobile sector.
The policy focuses on creating an ecosystem to eliminate unfit and polluting vehicles. Its objectives are to reduce pollution of old and defective vehicles, achieve a reduction in vehicular air pollutants, improve road, and vehicular safety, achieve better fuel efficiency, formalize the present informal scrapping industry and boost the availability of more economical raw materials for automotive, steel, and electronics industry.
The Finance Minister, in her Budget speech, said that the policy will encourage fuel-efficient and environment-friendly vehicles, hence, reducing vehicular pollution, and oil imports.
A need of the hour
There has been a crying need for such a scheme at a national level for several reasons:
- According to the Centre for Science and Environment (CSE), by 2025 India will have more than two crore old vehicles nearing the end of their lives, while India keeps adding fourteen hundred more each day. Hence, the policy will seek to reduce the congestion on roads.
- It is an extension to the NGT rule in Delhi NCR.
In 2015, the National Green Tribunal barred diesel vehicles older than ten years to commute on the roads of Delhi and its neighboring region.
- A study conducted by IIT Bombay in 2014, revealed that vehicles manufactured and sold prior to 2005 were responsible for nearly seventy percent of the total pollution load from vehicles. The upcoming policy will be a shot in the arm for these polluting vehicles.
Key Features of the Policy
The outline for the policy shared by the ministry highlights several key points :
- Personal vehicles older than twenty years and commercial vehicles older than fifteen years will have to undergo a fitness test at the government-registered ‘Automated Fitness Centers.’
- Vehicles that do not pass the test shall be termed as ‘End-of-life vehicles’, which means that the vehicle will have to be recycled.
- This will make way for older vehicles to be scrapped.
- In case, the vehicles pass the test, owners will have to pay some amount as a fee for re-registration.
- According to the new policy, the re-registration fee would be hiked around eight times for personal vehicles, and around twenty times for commercial vehicles.
Major Benefits
The policy is touted as a major step to boost the Indian automobile sector as well as offer benefits to those opting for scrapping their old vehicles. Terming the policy a boon, Union Minister Nitin Gadkari said it would lead to a thirty percent increase in profits for the Indian automobile industry with turnover up to tens of lakhs in the following years. He further asserted that the policy shall be a ‘win-win’ as it will help improve fuel efficiency and reduce pollution.
The scrapping of old and defective vehicles will reduce their count, leading to about twenty-five to thirty percent reduction in air pollutants and improve road safety. Furthermore, recyclable materials like plastic, steel, and copper could be reused and thus reduce the cost of vehicles.
The revival of the automobile and other sectors associated will boost tax revenue. Tax collection amounting to ten thousand crores is estimated owing to proper implementation of scrappage policy.
As per the Bureau of Energy Efficiency, if India implements the policy effectively, and shifts towards higher fuel efficiency norms, then there can be a reduction of up to 22.97 million tons of fuel demand in India by 2025, saving us imports and other associated costs, and also has the potential to promote India as a vehicle manufacturing hub in the world.
Incentives have been proposed for vehicle owners who choose to scrap them:
- In case a person decides to scrap their old vehicle at any registered scrapping center, they will get approximately four to six percent of the value of the vehicle’s ex-showroom price.
- Moreover, if they buy a new vehicle, they will be given a flat five percent discount on presenting a scrapping certificate.
- Registration fees will also be waived on the purchase of a new vehicle.
Challenges on the way
While the industry and its people agree that the policy will push forward India as a global manufacturing hub, help clean the environment and improve road safety. However, there are also questions and concerns raised that need to be addressed.
- Source of incentives:
Manufactures normally take ten to fifteen per cent profit on any car sale, and the government collects nearly fifty percent of it through tax, registration, and other medium. Therefore, the industry expects the government to provide incentives for every incremental vehicle sale. However, one could argue that the government may not be the direct beneficiary, Hence, providing incentives from public money may not be feasible.
- Uncertainty regarding future growth:
Even though the present policy affects car buying and usage patterns, many are still cautious taking into account their past experiences. When the automobile sector transitioned Bharat Stage (BS) emission standards from III to IV to VI, older vehicles kept operating. The transition did reduce emissions considerably and also improved road safety, but it came at a huge cost to the industry.
- Scrapping capacity of India, a big question :
As of now India only has one government-authorized scrappage workshop in Greater Noida. Moreover, there is no standard operating procedure when it comes to setting up vehicle scrapping centers.
- Regulation on pollutants released due to scrapping:
The process of scrapping releases many toxic metals such as mercury, lead, cadmium, etc., if it is not regulated properly then it can pollute nearby areas with long-lasting consequences, defeating its very own purpose of reducing pollution.
The way forward
The policy can possibly be more effective if the central government allows GST cuts for replacement vehicles, including Electric Vehicles.
Further, there is a need for India centric policy. Presently, India does not have an organized system for vehicle disposal and vehicles that reach their end-of-life are usually sold to ‘Kabaadi’ which largely remains unorganized.
There needs to be a system for the segregation of vehicles of different types into different categories so that their components can be recycled and reused efficiently.
To conclude, The Vehicle Scrapping Policy has the potential to boost economic growth, and also improve our environmental position. However, its implementation is the key. The two to three-year time given in the policy is necessary to prepare the industry and its groundworkers for the upcoming changes and recover from its existing setbacks.
Source: Multiple References
