Vehicle scrappage policy may come with tax breaks

Our Bureau New Delhi | Updated on March 18, 2021

Transport Minister Nitin Gadkari says automated fitness testing and scrapping units to come up by October 1

In a move to develop an organised vehicle scrapping ecosystem in the country, the Road Transport Ministry proposes to bring in rules for setting up automated fitness testing and modern scrapping centres by October 1. The policy also proposes lower GST and road tax for vehicles bought against those scrapped at registered facilities.

Broadly, the attempt is to move towards automated testing of all vehicles instead of the present manual checks. Also, following the Belgium model, the modern scrapping centres will aim to recycle most of the metal and recover 90 per cent of the raw materials.

The Ministry on Thursday notified draft rules for what is to be termed ‘Registered Vehicle Scrapping Facility (RVSF)’. The rules for testing centres are in the works, and the policy envisages giving unfit vehicles end-of-life certificates making their scrapping mandatory.

The plan is to start with an integrated vehicle scrapping facility at Alang in Gujarat (known for ship recycling). The Ministry has set a target of 50 scrapping centres by December 2023, and 75 automated fitness centres by March 2023, said a Ministry official.

Raw material recovery

On the scrapping policy or the voluntary vehicle fleet modernisation programme, Gadkari said at a press meet that the country has lots of vehicles that are not formally scrapped or recycled.

Use of modern scrapping centres can result in extraction of steel, aluminium, copper and other rare-earth metals that are low-cost raw material for making electric vehicles, said Gadkari. They will also help in the backdrop of high metal prices.

Vehicle scrapping is largely unorganised now. While the Mahindra-MSTC joint venture operates a modern scrapping unit in Noida, Maruti Suzuki along with Toyota plans to set up one, and a Tata Group company is also weighing the option, said an official source.

Lower GST, road tax

A network of modern testing and scrapping centres forms part of an overall policy and support infrastructure to promote newer, safer, fuel-efficient vehicles. Other components of the policy, which Gadkari said have been proposed to the Finance Ministry and States, include proposed lower GST and reduced road tax for vehicles bought against those scrapped at registered facilities. To discourage use of vehicles of over 15 years, the Road Ministry has proposed higher registration fees for them.

It has been proposed that commercial vehicles be de-registered after 15 years if they fail to get a fitness certificate, while private vehicles be de-registered after 20 years if found unfit or the registration certificate is not renewed.

Anuj Sethi, Senior Director, Crisil Ratings, expects passenger vehicle costs to drop 8-10 per cent for most segments.

GPS-based tolling

In another move, Gadkari told Parliament that in one year tolling on highways will be done using the GPS technology (besides Fastags) that will do away the need to stop vehicles at toll plazas. New vehicles have already been asked to fit GPS in them, he said. All toll plazas will be dismantled.

Published on March 18, 2021

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