MoRTH or Ministry of Road Transport and Highways has approved the much-awaited scrappage policy for government vehicles. The policy says that the vehicles that fall under Central and State Governments which are older than 15 years will be scrapped. The policy was approved on 25th January and it will come in effect on April 1st 2022. Ministry of Road Transport and Highways has still not announced any policy for personal and commercial vehicles. Nitin Gadkari, The Union Minister for Road Transport and Highways has also approved a proposal to collect ‘Green Tax’ also known as pollution tax for older vehicles. The proposal is currently being sent to the states for consultation. So, we would have to wait for a bit to get more details on the Green Tax or pollution tax. One important thing to note is that the Green Tax will be applicable to all the vehicles, unlike the scrappage policy that is applicable only to the government vehicles.
The scrappage policy was in works for quite some time and has now been finally approved. The scrappage policy is expected to increase the demand for vehicles because the old vehicles will be recycled which should cut costs of raw materials. At the starting of this year, most of the manufacturers increased the prices of their vehicles stating that the cost of raw materials has increased. So, gradually the scrappage policy should also help in decreasing the costs of the vehicles in the Indian market. The COVID-19 pandemic has already affected the automobile industry of India in a very negative way. So, the scrappage policy should be able to provide a little boost to the economy as disposing of old government vehicles would mean that new vehicles would be purchased which will help in increasing the demand for personal vehicles.
Then there is the Green Tax which will be levied at the time of renewal of fitness certificate of transport vehicles older than 8 years. The rate is set to 10-25 percent of the road tax. Personal vehicles will have to give Green Tax when their Registration Certificate is renewed after 15 years. The Green Tax will be 50 percent for vehicles that are registered in ‘highly polluted cities’. Overall, the tax will depend on factors such as fuel type and type of vehicle. However, we think more factors can be included once the Green Tax is introduced. Vehicles that are strong hybrids, vehicles that run on alternate fuels like CNG, LPG, ethanol etc., electric vehicles, will be exempted. This makes sense because vehicles like these have pollution levels that are significantly less than the vehicles that run on petrol or diesel. Then there are public vehicles like city buses. These will have to give a lower green tax. Vehicles used in farming activities like harvester, tiller, tractor etc. will also be exempted.
All the revenue that will be generated by collecting Green Tax will be kept in a separate account by the government. It will be used by states to set-up state-of-art facilities for emission monitoring and for tackling pollution. Currently, the guidelines are under consultation by state so we would have to wait for the official government policy that comes into play for the Green Tax.