Delhi Govt Launches Vehicle Tax Discount on Scrapping Old Vehicles

07-11-2024

In November 2024, The Delhi government introduced a new vehicle scrapping and registration scheme to promote the replacement of old, polluting vehicles with newer, cleaner models.
Under this scheme, owners who scrap their old petrol and diesel vehicles that have completed 15 years (for petrol) and 10 years (for diesel) will be eligible for tax concessions on the registration of a new vehicle.

Key Features of the Scheme:

Tax Concessions for Vehicle Registration:
1. 20% discount on the motor vehicle tax for registering a new non-transport petrol, CNG, or LPG vehicle if the old vehicle (over 15 years for petrol, 10 years for diesel) is scrapped.
2. 15% discount on the tax for registering a new non-transport diesel vehicle when the old vehicle is scrapped.
For Transport Vehicles (Commercial Vehicles):
1. 15% concession on registration tax for petrol, CNG, or LPG transport vehicles.
2. 10% concession on the tax for registering diesel transport vehicles.
Eligibility for Discounts:
1. The vehicle owner must present a Certificate of Deposit (COD) for the old vehicle, which must be scrapped at a government-approved Registered Vehicle Scrapping Facility (RVSF).
2. The COD is valid for three years from the date of issue and will be electronically tradable, making the process more efficient and transparent.
Concessions Limitation:
1. The total tax concession for both transport and non-transport vehicles cannot exceed 50% of the scrap value of the old vehicle.
Exclusions:
1. The scheme does not apply to government-owned or impounded vehicles handed over by enforcement agencies for scrapping. Certificates of Deposit (COD) for such vehicles will not be tradable electronically.

Background and Implementation:

The scheme aims to reduce pollution in Delhi, which has been suffering from high levels of air pollution due to the large number of old vehicles still operating in the city.
As part of the plan, the Transport Department has already impounded over 3,000 old vehicles that were either illegally plying or parked in public spaces.
Delhi’s Vehicle De-registration: Around 5.5 million old vehicles have already been de-registered in Delhi.
However, an estimated 1 to 1.5 lakh old vehicles remain in the city, still contributing to pollution.
Notification Details: The notification for the scheme was published on October 15, and has already been implemented.
People can now avail of the incentives as part of the program.

Importance of the Scheme:

By encouraging the scrapping of older vehicles, which typically emit higher levels of pollution, the Delhi government hopes to improve the city’s air quality and reduce the number of polluting vehicles on the roads.
Sustainability and Green Initiatives: The scheme aligns with the broader goal of promoting more eco-friendly vehicles like those running on CNG and LPG.
These fuels are considered cleaner alternatives to diesel and petrol, thus contributing to the reduction of carbon emissions.
Boost to Vehicle Scrapping Industry: The scheme will also provide a boost to the vehicle scrapping industry in Delhi by encouraging people to use authorized scrapping centers, which must be certified by the government.

Current Situation and Enforcement Efforts:

Drive Against Old Vehicles: In line with the new scheme, the Transport Department of Delhi has launched a joint drive with agencies like the Municipal Corporation of Delhi (MCD) and Traffic Police.
This drive aims to remove and scrap old vehicles, especially those that are being used illegally or parked in public spaces.
Impounding of Vehicles: As part of this drive, over 3,000 old vehicles have been impounded and sent to the RVSFs for scrapping, ensuring that these vehicles do not continue to pollute the environment.

India’s Vehicle Scrapping Policy: Why Scrap Old Vehicles, and How?

India has launched a Vehicle Scrapping Policy, also known as the Voluntary Vehicle-Fleet Modernisation Programme, to encourage the phasing out of old, polluting vehicles and promote the use of newer, more efficient and environmentally friendly cars.
The policy aims to reduce pollution, improve safety on the roads, and create a circular economy by recycling vehicle materials.
The policy was announced in Parliament in March 2021 by Nitin Gadkari, the Minister of Road Transport and Highways, and later discussed by Prime Minister Narendra Modi at an investor summit in Gujarat.

Key Features of the Policy:

Targeted Vehicles for Scrapping:
1. Commercial vehicles over 15 years old that fail an automated fitness test will be scrapped.
2. Personal vehicles over 20 years old that fail the fitness test will also be scrapped.
3. Vehicles that pass the test can continue to operate but will face higher re-registration charges.
The Concept of a Circular Economy:
1. The policy promotes a circular economy, where materials from old vehicles, such as metals, plastics, and parts, can be recycled and used again. This reduces waste and pollution, making the system more sustainable.
2. This is similar to industries where old items, like ships, are broken down and recycled.
Scrapping and Recycling:
1. When a vehicle is scrapped, valuable materials like steel, plastic, and rubber can be reused in the production of new vehicles. This creates a new recycling industry, reducing the need for new raw materials.
Economic Benefits:
1. Scrapping old vehicles is expected to boost the auto industry, creating more demand for new vehicles. This also helps economic growth by supporting jobs and attracting investments in the vehicle recycling industry.

How Does the Scrapping Process Work?

Fitness Tests:
1. Vehicles will undergo automated fitness tests that check the vehicle’s fitness based on emission standards, braking systems, and other key factors.
2. The fitness test ensures that the vehicle is safe to drive and does not pollute excessively.
Scrap Certification and Incentives:
1. Vehicle owners who choose to scrap their old vehicle will receive a Certificate of Deposit (COD). This certificate can be used to claim benefits such as:
  1. Tax rebates on the registration of a new vehicle.
  2. Discounts on purchasing a new vehicle.
  3. The COD is tradable and can be used by anyone, not just the owner of the scrapped vehicle.
Re-registration Charges for Old Vehicles:
1. If a personal vehicle passes the fitness test but is over 15 years old, the owner will have to pay higher re-registration charges. These charges could increase from eight times to as much as 20 times the original cost, depending on the type of vehicle.
Implementation Timeline:
1. Heavy commercial vehicles will begin mandatory testing from April 2023.
2. Personal vehicles will start undergoing tests from June 2024.
3. The government is working to ensure the necessary infrastructure is in place for the policy.

Challenges and opportunities related to Infrastructure Readiness and Model Fitness Centres in India:

Category	Challenges	Opportunities
Infrastructure Readiness	Lack of infrastructure to test and scrap vehicles on a large scale.	Government has laid out standards and specifications for fitness centres and scrapping yards.
	Limited number of fitness testing and scrapping centres across the country.	Potential for growth of the scrapping industry with private sector incentives to set up facilities.
Model Fitness Centres	Setting up model centres requires significant investment (Rs 17 crore each).	Government promoting the creation of model fitness testing centres in each district.
	Need for infrastructure in remote or underdeveloped regions.	At least 718 fitness centres planned, with extra focus on cities like Delhi.
	Ensuring automated and transparent processes at each centre.	Standardization of fitness and emission tests across the country.

Why Should You Scrap Your Old Vehicle?

Environmentally Responsible: Scrapping an old vehicle helps reduce pollution since newer vehicles are more fuel-efficient and meet better emission standards.
Financial Incentives: By scrapping an old vehicle, owners can receive tax rebates and discounts on buying a new vehicle. The Certificate of Deposit (COD) received from the scrapping can be traded, meaning it has value even if the owner doesn’t buy a new vehicle immediately.
Sustainability: The policy promotes the reuse of materials like steel and plastics from old vehicles, which can be recycled to manufacture new cars, helping India move towards a sustainable economy.

What About Vehicles That Pass the Fitness Test?

Old vehicles that pass the fitness test can continue operating, but their re-registration charges will be much higher, discouraging the use of old, inefficient vehicles.