Green Tax approved for private vehicles over 8 years old: What this means for car owners

This is not good news for owners of old vehicles. Once your vehicle registration period is over, you would have to pay an additional Green Tax to continue using your vehicle. The tax has just been officially approved by the government.

For private vehicles, the registration validity is 15 years. After that, owners have to renew their RCs and get a fitness certificate for their vehicles. At this point, they would have to pay the green tax, which could be up to 50 per cent of the road tax of the vehicle per year. In Delhi NCR, registration validity for diesel vehicles is only up to 10 years. The green tax would be lower in less polluted cities, and in cities with high air pollution levels, it would be as high as 50 per cent.

The green tax is also applicable to public transport, and the norms are stricter for them. Public transport vehicles will have to pay the green tax after 8 years.

There will be other factors also that will affect the amount of Green Tax such as type of fuel (petrol/diesel) and type of the vehicle that you are driving. Vehicles which run on alternate sources of fuel such as ethanol, LPG, CNG, strong hybrids and electric vehicles will be exempted from the Green Tax.

Farming equipment such as harvesters, tractors, tillers are also exempted from the Green Tax. It should be safe to assume that diesel vehicles will attract more Green Tax as they do pollute more than petrol vehicles. Diesel vehicles that are older than 10 years are also already banned in Delhi-NCR. As per the government, revenue collected from Green Tax will be kept in a separate account. It will be used by states for tackling pollution and set up set-up state-of-art facilities for emission monitoring.

“It is estimated that commercial vehicles, which constitute about 5 per cent of the total vehicle fleet, contribute about 65-70 per cent of total vehicular pollution. The older fleet, typically manufactured before the year 2000, constitute less that 1 per cent of the total fleet but contributes around 15 per cent of total vehicular pollution,” the press release says. “These older vehicles pollute 10-25 times more than modern vehicles.”

This is being done to promote less polluting vehicles and to motivate people to switch to vehicles that produce fewer emissions.

The idea here is, because of the Green Tax, people will refrain holding on to their old, polluting vehicles by renewing their RCs after getting new fitness certificates. If they want to do it, they will have to spend more during RC renewal as the Green Tax also now becomes an additional expense. This should, over time, make people less interested in keeping their old vehicles and so pollution should drop.

How much can you expect to pay?

Suppose you have a car like the Maruti Swift that’s over 8 years of age, expect to pay about Rs. 5,000 as green tax. This is over and above the Rs. 10,000 to Rs. 12,000 you will have to pay when you renew the fitness certificate.

But will pollution actually drop because of the Green Tax?

Vehicles that were manufactured before 2000 constitute less than 1 percent of total vehicles, but they emit 15 percent of the total pollution emitted from vehicles. These older vehicles pump out around 10 to 25 percent more pollutants than modern vehicles.

But there is a financial aspect to this. Even a Green Tax is perhaps not enough motivation to get rid of an old, reliable vehicle. The extra financial burden on the owner is not going to make him happy, but paying it still looks better than buying a new vehicle. This is even more true in the slow-growing economy that we have today, that is just beginning to recover from the impact of the Covid 19 pandemic.

It also depends on the type of owner. Car enthusiasts will pay the green tax and hold on to their vehicles. But rural owners, who use their old vehicles for their everyday business and jobs, cannot afford to buy new vehicles either – even with incentives that may be offered by the upcoming Scrappage Policy. We may end up with a situation where owners are spending more, and fattening the coffers of the government a little bit. But an actual impact on pollution? We are skeptical about that.