Voluntary Vehicle Fleet Modernisation Program in India

published on 24 March 2021 | reading time approx. 4 minutes

With an aim to keep up with the rapidly developing technology and with that, increasing pollution, the Minister for Road Transport and Highways, Nitin Gadkari, on March 18, 2021 announced the Vehicle Scrapping Policy, also known as the Voluntary Vehicle-Fleet Modernization Program (VVMP), in Lok Sabha. This Policy is in the interest of a clean environment and for phasing out of unfit and polluting vehicles.

The primary objective of the policy is to reduce population of old and defective vehicles and also to achieve reduction in vehicular air pollutants to fulfil India’s climate commitments. This policy is also expected to improve road and vehicular safety, achieve better fuel effeciency, formalize the currently informal vehicle scrapping industry and boost availability of low-cost raw materials for automotive, steel and electronics industry.

Furthermore, the introduction of this policy is expected to attract additional investments of around Rs. 100 Billion and 35,000 direct job opportunities. The policy has been inspired greatly from the Germany automotive policy and could be a great opportunity for the German automotive sector to revisit their existing business strategy in India. The Ministry shall publish draft notifications in the next few weeks, to be in the public domain for the period of 30 days to solicit comments and views of all involved stakeholders.

Key highlights of the Policy are as under:

VOLUNTARY VEHICLE FLEET MODERNISATION PROGRAM

The policy proposes that commercial vehicles be de-registered after 15 years in case of failure to get fitness certificate.
Accordingly, private vehicles be de-registered after 20 years if found unfit or in case of a failure to renew registration certificate.
All vehicles of the Central Government, State Government, Municipal Corporation, Panchayats, State Transport Undertakings, Public Sector Undertakings and autonomous bodies with Union and State Governments may be de-registered and scrapped after 15 years from the date of registration.
As per the policy, the criteria for a vehicle to be scrapped is primarily based on the fitness of the vehicles through Automated Fitness Centres in case of commercial vehicles and Non-Renewable Registration in case of private vehicles. This criteria is adapted from international standards from various countries like Germany, UK, USA and Japan.
A vehicle failing the fitness test or failing to get a renewal of its registration certificate may be declared as End of Life Vehicle.
Criteria to determine vehicle fitness will be primarily emission tests, braking, safety equipment, among many other tests which are as per the Central Motor Vehicle Rules, 1989.

INCENTIVES

This policy provides for a string incentives to owners of old vehicles to scrap old and unfit vehicles through registered scrapping centres, which shall provide the owners with a scrapping certificate.
4-6% of ex-showroom price of new vehicle to be given to the owner by the scrapping centre.
The State Governments may be advised to offer a road-tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles
5% discount may be given by the vehicle manufacturers on purchase of new vehicle against the scrapping certificate.
Additionally, registration fees may also be waived for purchase of new vehicle against the scrapping certificate.

REGISTERED VEHICLE SCRAPPING FACILITY (RVSF)

The Ministry of Road Transport and Highways will promote setting up of a Registered Vehicle Scrapping Facility (RVSF) across India and will encourage public and private participation for opening of such centres.
Efforts are being made to set up Integrated Scrapping Facilities across India. Some of the identified places include Alang in Gujarat, where it is being planned to develop a highly specialized centre for scrapping, among many other potential centres, where different scrapping technologies can be synergized together.
With a simplified registration process through single window, the scrapping facility shall have to comply with environmental and pollution norms and with all applicable acts of law.
It shall be ensured that the scrapping centres have adequate parking facility, de-pollution equipment for air, water and sound pollution and adequate facilities for hazardous waste management and disposal.
These centres may have adequate space for test-lane, IT servers, parking and free movement of vehicles.

To avoid conflict of interest, operators of fitness centres shall only provide testing facility and shall not provide repair/sale of spare services.
Appointment for fitness centres may be booked online and tests reports shall also be generated in an electronic mode.

BENEFITS

Phasing out of the old vehicles is expected to increase the demand in the industry and he overall turnover of the auto industry to increase by around Rs. 5.5 trillion from current Rs. 4.5 trillion.
The recycled material from the old vehicles will also help in reducing the prices of the vehicles and the industry will get a minor boost.
Materials like steel, plastic, rubber, aluminum that are used in manufacturing automobiles would see a significant decrease in their prices.
Fuel effeciency and safety norms will be more prevalent on Indian market. This can lead to a big boost to the automotive industry in which the German market players have their expertise.

TENTATIVE TIMELINE FOR APPLICATION OF PROPOSED SCRAPPING POLICY

The Rules for Fitness Tests and Scrapping Centres will come into effect from October 01, 2021.
Scrapping of government and PSU vehicles above 15 years of age to be undertaken from April 01, 2022.
Mandatory fitness testing for heavy commercial vehicles to be in effect from April 01, 2023
Mandatory fitness testing for other categories will come into effect in a phased manner from June 01, 2024.