Vehicle scrappage policy: Failure in fitness tests should be the only criteria, not life of a vehicle

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Two years ago I sold my Honda City vehicle for a scrap value of Rs 22,000. In metro cities, petrol vehicles are denied registration after 15 years. The vehicle was in good condition; it had done about 1.30 lakh kms and with repairs, more frequent than earlier, could have been driven for many more years.

I even obtained permission from the Delhi road transport authority for its transfer to my hometown in another state where petrol vehicles can ply for 20 years. But between the expiry of registration in Delhi and re-registration, there was no insurance cover. Transporting it was expensive and driving it down across the country to my hometown was equally expensive. Instead, I opted for a second-hand car of the same make from a company dealer for Rs 3 lakh. It had a residual legal life of five years and had done a little under 70,000 kms.

Finance Minister Nirmala Sitharaman said in her Budget speech that the road transport ministry would soon announce a policy for scrapping end-of-life vehicles (ELVs) to discourage ownership of polluting jalopies.

The draft guidelines were announced in October 2019 for one month of public comment but the policy has not been finalised. The guidelines provided for setting up authorised vehicle scrapping facilities (AVSF) across the country. These were for vehicles not validly registered; those which their owners wanted to scrap voluntarily and for impounded vehicles. The government estimated there were 28 million ELVs (older than 15 years) ready for scrapping as of April 2020.

The guidelines provided for certificates of deposit to be issued when vehicles were offered for scrapping. The certificates would be tradable once and could be used to buy a new vehicle. Once utilised, they would be stamped ‘cancelled’ to prevent reuse. The AVSF would also issue a certificate of vehicle scrapping to recognise the disposal of a vehicle and absolve the owner of liability in case of misuse.

In another move, the road transport ministry has proposed a green tax to be levied from April 2022, if states agree. Commercial vehicles older than eight years will be charged the extra tax at a rate of 10-50% of the road tax at the time of renewal of the fitness certificate.

Personal vehicles will be taxed at the time of renewal of the registration certificate after 15 years. Buses used for public transport will be taxed at a lower rate. Farm vehicles like tractors and harvesters, electric vehicles, hybrids and those using compressed natural gas or liquefied petroleum gas will be exempt. The revenue collected from the green tax will be set aside for measures to tackle pollution like emission monitoring stations.

The vehicle scrapping business currently is in the unorganised sector. The activity pollutes the soil, water and air. AVSFs will introduce scientific methods of recycling. But the scrapping policy should not raise the cost of owning vehicles whose emissions are below set norms.

The auto industry may want diesel and petrol vehicles to be scrapped after 10 and 15 years respectively to generate demand. But this might result in an increase, not decrease, in overall greenhouse gas (GHG) emissions. If emissions generated by the production and operation of new vehicles exceeds those from older vehicles, the purpose will be defeated. There should be a way of determining net GHG emissions.

If a vehicle has been maintained well or used sparingly and meets emission standards, it should be allowed to remain on the road even past 15 or 20 years. Tightening the emission norms might be better than setting arbitrary cut-off years for scrapping. The deadlines should be for fitness testing.

The government’s attitude to vehicular pollution is ambivalent. The vehicle scrapping policy and green tax are meant to drive demand for vehicles. But the taxes on fuels are punishing.

These curb emissions by discouraging vehicle use. In 2019-20, the central government collected Rs 2.87 trillion (lakh cr) from indirect taxes on petrol and diesel, according to the oil ministry’s Petroleum Planning and Analysis Cell. Excise duty alone was Rs 2.23 trillion, or 92% of the total excise revenue. States collected 2.21 trillion in taxes as well. As of 1 February, taxes accounted for 61% of the retail price of petrol (Rs 86.30/litre) in Delhi. Their share in Delhi’s diesel price was 56%.

Rather than mitigating pollution, the green tax may end up as another impost. As per a research report by Jeffries’, a brokerage, the annual road tax in Delhi on a 10-tonne truck is Rs 3,800. A green tax of 50% would add Rs 1,900 to the annual cost or a fraction of the cost of buying a new vehicle.

Stricter emission standards and rigorous enforcement are needed. The government estimates that commercial vehicles which constitute about 5 percent of the total fleet contribute about 65% of vehicular pollution. Vehicles manufactured before 2000 – less than 1% of the fleet – produce 15% of the pollution.

This, and advances in electric vehicle technology might do more to check pollution than raising the already high cost of ownership and operation of vehicles.