New Vehicle Scrappage Policy and Green Tax

VehicleScrappage Policy

Finance Minister Nirmala Sitharaman in August 2019 said a scrappage policy is in the works. On July 26, 2019, the government had proposed amendments to motor vehicle rules to allow the scrapping of vehicles older than 15 years in a bid to spur the adoption of electrical vehicles. In July last year, the National Green Tribunal rapped the MoRTH for the delay in issuing guidelines on the scrapping of vehicles. A bench headed by NGT Chairperson Justice Adarsh Kumar Goel had said, A proper mechanism to set up authorized recycling centres compliant with environmental norms was an urgent need view of a large number of “End of Life Vehicles” (ELV). Recently Nitin Gadkari, minister of road transport and highways, has approved a new “Vehicle Scrappage Policy” to incentivize the user to scrap old vehicles and buy new ones. The ministry released a statement, “The Minister approved the policy of deregistration and scrapping of vehicles owned by Government department and PSU, which are above 15 years in age. It is to be notified and will come into effect from April 1 2022.” The old vehicles are not environmentally friendly they emit a lot of gases like carbon monoxide (CO) which harms the life of animals and plants. Here the government is implying that the vehicle is not anymore useful and is only causing harm to the environment. After 15 years when your vehicle will be scrapped the government will try to give you an incentive for buying a new vehicle which will cause less pollution. The policy not only includes private vehicles but also the vehicles owned by the government departments and PSU. The final draft of the scrappage policy has been approved but details were yet to be shared in the public domain by MoRTH as it has been sent to state governments.

  • The policy is expected to offer incentives to motorists who decide to scrap their old vehicles.

  • The incentives are expected to be a waiver of the registration fee and a discount on road tax.

  • The old vehicles would be used in recycling clusters thereby, cutting the cost of raw materials for automobile industries. this may slightly lower the price of vehicles.


Union transport minister Nitin Gadkari has announced his ministry’s approval of a Green Taxon vehicles on specified vintage, as a means of dissuading people from using polluting vehicles. Let’s understand the proposed taxation –

  • The government will levy a green tax on transport vehicles older than 8 years at the time of renewal of fitness certificate and personal vehicles older than 15 years at a rate between 15 to 25%. When we buy a vehicle, the RTO passes us an RC Card which is generally valid for 15 years, and after 15 years the owner of the vehicle has to renew the RC card, at this point the government will ask for green tax.

  • The public transport vehicles like GSRTC buses will be charged lower green tax.

  • Up to 50% of road tax will be levied on vehicles being registered in highly polluted cities like New Delhi and Ghaziabad. The tax rate will differ depending on the type of vehicle. (petrol, CNG, diesel)

  • There will be exemptions for tractors, harvesters and tillers used in farms, hybrids, electric vehicles, vehicles running on liquefied petroleum gas (LPG) and on the vehicle using compressed natural gas (CNG) as fuel.

  • The revenue collected through the green tax will be kept in a different account and will be only used to clean polluted rivers, air etc. thus the money will be used only for tackling pollution.

  • The Union ministry has asked for input from the state governments and the policy is scheduled to come into force on April 1st 2022.

  • These are all the points of the newly presented Green Tax. India needs reforms as we have the most polluted cities, but will the Green Tax Succeed? Green tax is already implemented in many of the developed nations, but how this will affect Indians? As we know after this Covid pandemic everyone of us has faced a monetary impact and this tax will add additional burden on the consumers and tax on public transport and commercial vehicles may lead to an increase in costs of tickets further. Therefore, Green Tax will affect a little bit on the common man’s wallet. But the change is necessary as this would not only curb the air pollution in India but will in return help in posting demand for new vehicles thus helping the ailing automobile industry of India. Additionally, older vehicles with outdated safety features would be phased out allowing for more people to be travelling in a safer modern vehicle. Old vehicles generally don’t have airbags, ABS braking systems etc. and about 151 thousand people die each year in car accidents. The Indian government is also trying to reduce its oil import bill and is pushing for the use of electrical vehicles is believed to help in reducing the amount of oil.

It is estimated that commercial vehicles, which constitute about 5% of the total vehicle fleet, contribute about 65-70% of total vehicular pollution. And this is why the government will start collecting green tax after 8 years of purchase. The older fleet, typically manufactured before the year 2000 constitute less than 1% of the total fleet but contributes around 15°o of total vehicular pollution. These older vehicles pollute 10-25 times more than modern vehicles. This is all the information which is available for the public, the state governments are considering the polices and soon we will get to know more about green tax and scrappage policy. India needs reforms as we have the most polluted cities and rivers and these policies can bring change if brought with good incentives and thinking about the common man.

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