To curb pollution, Sitharaman announces voluntary vehicle scrappage policy

In what would give an impetus to sales in the automotive industry, the government Monday announced the long-awaited voluntary vehicle scrappage scheme to phase out old vehicles to curb environmental pollution and oil imports.

Finance Minister Nirmala Sitharaman in Budget Speech 2021 said the policy for the same will be announced separately. The fitness of personal vehicles will be checked after 20 years and those of commercial vehicles after 15 years, to get off roads old polluting ones.

Automobile sales fell 18% to 21.5 million units last fiscal and by another 24% to 13 million units till December FY21.

Last month, the roads ministry had proposed to levy a ‘green tax’ on old transport vehicles. According to the proposal, transport vehicles older than eight years could be charged a green tax at the rate of 10-25% of road tax at the time of renewal of fitness certificate. For personal vehicles, the tax will be levied at the time of renewal of registration certificate after 15 years. Industry executives had called the proposed green tax a step in the right direction as it will disincentivise people from using older vehicles.

“Along with this policy, the government must also institute a much more effective way of certifying the fitness of vehicles, both passenger as well as commercial,” RC Bhargava, chairman of the country’s largest automaker Maruti Suzuki had told ET at the time. “Currently, I believe fitness certificates are only required for commercial vehicles and not for passenger vehicles. But there’s no reason why passenger vehicles should not also be certified for fitness every two years or three years.”

However, transporters had objected to the proposed tax as it will force them to retire their vehicles sooner than the current practices without any incentive. The cut-off of 15 years, as announced in the Budget, will allay to some extent apprehensions of transporters who had deemed the eight-year timeframe for levy of ‘green tax’ on transport vehicles to be arbitrary, said industry observers.

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