India’s vehicles scrappage policy: A step forward but a missed opportunity

The much-awaited draft policy on vehicle scrappage is finally out. The policy outlines the criteria for defining end-of-life vehicles and scrapping them. It also makes provision for scrapping facilities for safe disposal of waste and material recovery. This is an important step forward towards building infrastructure for organised and scientific scrapping of old vehicles.

But the draft policy also misses an opportunity: Of designing the policy as an effective stimulus programme for green recovery in the sector to achieve deeper and quicker air quality benefits.

This policy has only ‘advised’ the state governments and the automobile industry to provide voluntary incentives to the owners of old vehicles.

The central government has not committed to make it a fiscal stimulus strategy in the post-COVID-19 times for quicker renewal of ageing, heavy duty vehicle fleet with Bharat Stage VI vehicles — or to link other segments with targeted electrification.

The proposal

This proposed policy seeks to phase out unfit vehicles to reduce vehicular pollution, meet the climate commitments, improve road safety and fuel efficiency, formalise informal vehicle scrapping industry and recover low cost material for automotive, steel and electronics industry.

The policy expects to spin jobs and attract investment as well.

It has advised the state government to waive off 25 per cent road tax for personal vehicles and 15 per cent for commercial vehicles along with the registration fees.

Vehicle manufacturers have also been advised to provide five per cent discount on purchase of new vehicles against scrapping certificates.

The Union ministry of road transport and highways will help to set up registered vehicle scrapping facilities including integrated vehicle scrapping facilities under public private participation and ensure compliance with environmental regulations for safe disposal of waste. This will enable depollution equipment, water and sound pollution control and hazardous waste management.

The central government will also support a network of automotive fitness centres with adequate test only lanes, information technology servers and other facilites and encourage private investments. These centres will help identify unfit and end-of-life vehicles. 

The milestones set in the draft policy require the rules for fitness tests and scrapping to be in place by October 1, 2021. All government and PSU-owned vehicles older than 15 years will be scrapped by October 1, 2022. There will be a mandatory fitness testing for heavy duty vehicles by October 2023; the same will be done for other vehicles by October 1, 2024.

It has been reported that scrapping centres will keep records and verify ownership of vehicles based on VAHAN database. Vehicles damaged in fire, riots or any devastation, declared as defective by manufacturers, and those confiscated by enforcement agencies will have to be scrapped.

There are over 51 lakh light motor vehicles older than 20 years; 34 lakh vehicles are older than 15 years. Around 17 lakh medium and heavy vehicles are older than 15 years. These unfit vehicles emit more than 10-12 times the pollutants than fit vehicles.

The missing links

The draft policy is a big positive for supporting a network of well-equipped scrappage facilities with adequate environmental safeguards to stop unsafe dismantling of old vehicles that contaminate water, soil and air and wastage of material. This can further integrate formal recyclers. But its focus on targeted fleet renewal for maximum emissions gains is still weak.  

The proposed policy puts the entire onus of incentivising fleet renewal on the state governments. They have been advised to waive off a big chunk of road tax and registration fees on replacement vehicles. These are important sources of state revenue, and the reaction of the state governments is still not known.

The more compelling question is whether the central government would consider centrally supported stimulus programme for post-pandemic green recovery. This is the global trend wherein governments have been giving conditional bailouts or tax support linked to emissions targets.

More effective leveraging of this policy is possible if the central government allows GST cuts for replacement vehicles, including electric vehicles, and considers direct incentives for targeted fleet renewal of most polluting old trucks and buses based on BS6 standards.

An old BS1 (Bharat Stage Emission Standard) truck was originally designed to emit 36 times higher particulates compared to a BS6 truck.

For such a targeted programme for heavy-duty vehicles, the policy can take a more nuanced approach. Consider that some truck owners may want to only dispose of the very old trucks without replacing them. But others may want to scrap and replace the older trucks.

In that case, a rebate can be given to the owners of end-of-life vehicles who are interested in ‘only scrapping’ the vehicle without immediately replacing them. And this rebate can be given based on scrappage certificate from authorized scrappage centres.

But higher incentives can be given for ‘scrappage and replacement’ of old / end-of-life vehicles with BS6 compliant vehicles. In this case, the vehicle dealer / manufacturer may also give matching incentives. The thumb rule could be to reduce the overall cost of the new replacement vehicle meeting BS6 standards up to 15 per cent.

Old trucks with more economic life left can get comparatively higher incentive as that will give higher emissions benefits.

The strategy, however, can be different for older personal vehicles: Cars and two-wheelers. For these vehicles, the central incentive can be linked with replacement with electric vehicles. This can be additional to the normal scrapping of end-of life vehicles as already proposed in the draft policy. This can maximise air quality gains.

The reason is simple: Personal vehicles are numerous and a generic public support for their fleet renewal can divert a lion’s share of allocated budget from the priority heavy duty segment. Therefore, the public support for personal vehicle segment can be linked only with voluntary electrification.

In Germany, replacing old cars with newer ones powered with internal combustion engine did not provide much effective emissions gains as replacing them with electric vehicles, according to a study by International Council on Clean Transportation.

Therefore, limiting the numbers of personal vehicles that can qualify for incentives and linking their voluntary replacement with electric vehicles can contribute towards accelerating the target of 30-40 per cent electrification by 2030.

Build in manufacturers’ responsibility for recyclability

The new policy also needs to align with the mandate for the manufacturers to meet targets for recyclability of material.

It is encouraging that the Automotive Industrial Standard-129 (AIS 129) on reuse, recycling and material recovery from vehicles were framed in 2015. This requires 80-85 per cent of material used in vehicle manufacturing by mass to be recoverable / recyclable / reusable at the end of life.

AIS-129 also restricts the use of heavy metals including lead, mercury, cadmium, hexavalent chromium, etc, and asks for coding of plastics to inform dismantlers. 

Make this mandatory as part of the scrappage policy. At the same time, strengthen this provision further to include goods vehicles, the N1 category, which is currently outside its scope.

The requirement of recyclability should be extended to 85-95 per cent to maximise material recovery as well as energy recovery from residual waste like used oil, non-recyclable rubber etc.

It is also important to align European regulation to include extended producer responsibility to make vehicle manufacturers responsible for their own waste. 

Do more

Clearly, this first ever formal scrappage policy in India is urgently needed to help build infrastructure for safe disposal and material recovery to minimise environmental hazards.

But India would be adopting scrappage policy during these unprecedented pandemic times, so it is necessary to leverage this targeted fleet renewal with well-designed central support for post-pandemic green deal.

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