An important step forward, but falls short of becoming an instrument of green recovery.
The much awaited draft policy on vehicle scrappage is finally out. This outlines the incentives for scrapping, criteria for defining the end-of-life vehicles, and makes provision for scrapping facilities for safe disposal of waste and material recovery. This is certainly an important step forward to build infrastructure for organized and scientific scrapping of old vehicles. But this misses the opportunity of desigbing 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 the old vehicles. There is no commitment from the central government to make this a fiscal stimulus strategy in the post Covid times for quicker renewal of the ageing heavy duty vehicle fleet with Bharat Stage VI vehicles or to link other segments with targeted electrification. This is a case of missed opportunity.
This proposed vehicle fleet modernization programme or vehicle scrapping policy seeks to phase out unfit vehicles to reduce vehicular pollution, meet the climate commitments, improve road safety and fuel efficiency, formalize informal vehicle scrapping industry and recover low cost material for automotive, steel, and electronics industry. The policy expects to spin jobs and attract investment.
The draft policy has advised the state government to waive off 25 per cent of road tax for personal vehicles and 15 per cent for commercial vehicles as well as registration fees. Vehicle manufacturers have also been advised to provide discount of 5 per cent on purchase of new vehicles against scrapping certificates.
The central ministry of road transport and highays will help to set up registered vehicle scrapping facilities including integrated vehicle scrapping facilities under public private participation (PPP) 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, IT servers, and other facilites and encourage private investnents. These centres will help to 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 I, 2021; all 15 year plus government and PSU-owned vehicles to be scrapped by October 1, 2022; and mandatory fitness testing for heavy duty vehicles by October 2023 and for other vehicles by October 1, 2024. It has been further reported that the scrapping centres will keep records, 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.
The draft policy has estimated that there are 51 lakh light motor vehicles that are more than 20 years and 34 lakh that are more than 15 years. Around 17 lakh medium and heavy vehicles ae more than 15 years. These unfit vehicles emit more than 10-12 times more than the fit vehicles.
The missing links
While the new 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, its focus on targeted fleet renewal for maximum emissions gains is still weak.
The proposed policy puts the entire onus of incentivizing 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. Given the fact these are important sources of state revenue, the reaction of the state governments is still not known.
The bigger and compelling question to ask is if the central government will consider centrally supported stimulus programme for post pandemic green recovery. This is the global trend in which governments are 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 and even consider direct incentives for targeted fleet renewal of most polluting old trucks and buses based on BSVI standards. An old BSI truck was originally designed to emit 36 times higher particulates compared to a BSVI truck.
For such a targeted programme for heavy duty vehicles, the policy can take a more nuanced approach. Consider the fact that some truck owners may want to only dispose of the very old trucks without replacing it. 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 immediate replacement. 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 BSVI 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 BSVI standards by upto 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 incentive can be linked with voluntary replacement with electric vehicles. Reason is simple. Personal vehicles are numerous and a generic public support for their fleet renewal can divert a lion 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. 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.
In fact, a study carried out by the International Council on Clean Transportation has shown that in Germany replacing old cars with new cars powered with internal combustion engine does not provide as much effective emissions gains as replacing with electric vehicles. 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 align with the mandate for the manufacturers to meet the target for recyclability of material to reduce the waste footprint and maximise material recovery. It is encouraging that the Automotive Industrial Standard – 129 (AIS 129) on reuse, recycling and material recovery from vehicles have already been 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 has also restricted the use of heavy metals including lead, mercury, cadmium, hexavalent chromium etc. and asked 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. Also the requirement of recyclability be extended to 85-95 per cent to maximize material recovery as well as energy recovery from residual waste like used oil, non-recyclable rubber etc. It is also important to align the European regulation to include extended producer responsibility to make vehicle manufacturers responsible for their own waste.
Clearly, this first ever formal scrappage policy in India is urgently needed to help build infrastructure for safe disposal and material recovery to minimize environmental hazards from junk vehicles and clunkers. But given the fact that India is adopting scrappage policy during these unprecedented pandemic times, it is necessary to leverage this targeted fleet renewal with well-designed central support for post-pandemic green deal.
Executive Director, Research and Advocacy | CSE