India Notifies The Regulatory Framework For Scrapping End-Of-Life Vehicles (ELVs)
The Prime Minister of India launched the National Automobile Scrappage Policy (“Policy”) in August, 2021 with an objective to phase out unfit and polluting vehicles plying on Indian roads in an environment friendly and safe manner. Hailing the concept of “modernity in mobility”, Prime Minister announced that the Policy will ensure cleaner emissions, fuel efficiency, better safety and promotion of a circular economy which will ultimately make the process of economic development more sustainable and environment friendly. This announcement was in line with the Finance Minister’s announcement on the Policy in the Budget for FY 2021-2022.
As a part of the regulatory framework related to the Policy, Union Government had earlier released draft notifications inviting comments from stakeholders on various aspects of the Policy. Recently, the Government has issued the final notifications to enforce the Policy. These notifications have been described in detail below:
An important component in the execution of the Policy is setting up of vehicle scrappage facilities which will be responsible for scrapping, dismantling and recycling old motor vehicles. With this objective in mind, the Union Government notified the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021 on 23 September, 2021 (“RVSF Rules”) which came into effect from 25 September, 2021.
Following are the key features of RVSF Rules:
RVSF Rules have been made applicable to: (i) all categories of vehicles and their last registered owners, automobile collection centres, automotive dismantling, scrapping and recycling facilities and recyclers of all types of automotive waste products; and (ii) the Guidelines for Environmentally Sound Management of End-of-life vehicles (ELVs) and Automotive Industry Standard (AIS) 129.
RVSF Rules have provided following key aspects regarding the registration of vehicle scrapping facilities (“RVSF”):
RVSF Rules allow the RVSF to scrap different types of vehicles. Some of these vehicles are: (i) those without renewed Certificate of Registration; (ii) those which have not been granted the certificate of fitness; (iii) ones which have been damaged due to fire, riot, natural disaster, accident or any calamity, following which the registered owner self certifies the same as scrap; (iv) vehicles which have outlived their utility or application particularly for projects in mining, highways, power, farms etc. as may be self-certified by the owner, etc.; and (v) any other vehicle voluntarily offered for scrapping by the owner.
Audit and certification: RVSF shall be audited by the relevant Registration Authority in the prescribed manner to ensure their functioning in compliance with applicable laws.
Apart from RVSF, Union Government has also notified the Central Motor Vehicles (Twenty First Amendment) Rules, 2021 with effect from 25 September, 2021 (“ATS Rules”) to govern automated testing stations (“ATS”), the procedure for fitness testing of vehicles through automated equipment and the procedure for grant of Certificate of Fitness by ATS.
Under the Central Motor Vehicles Rules, 1989, transport/commercial vehicles are required to go through fitness testing every two years for vehicles up to 8 years old and every year for vehicles older than 8 years. Whereas, non-transport vehicles are required to go through this test each time their registration is sought to be renewed. As such, the ATS Rules assume significance in the overall regulatory framework for vehicle scrapping as these testing stations will determine the fitness of a vehicle, basis which the assessment for scrapping or renewal of the registration of a vehicle will be made. If a vehicle fails in the fitness test, it will be declared an end-of-life vehicle.
ATS Rules have provided for the following key aspects regarding the registration of ATS:
Through a notification dated October 6, 2021, Government has amended the Central Motor Vehicles Rules, 1989 to provide incentives with an objective to nudge vehicle owners to discard old and polluting vehicles, which have higher maintenance and fuel consumption costs.
It provides that a vehicle registered against submission of “Certificate of Deposit” (issued by the scrapping facilities on submission of a vehicle for scrapping) shall be eligible for concession in the motor vehicle tax payable on such vehicles: (i) upto twenty-five per cent in case of non-transport vehicles; and (ii) upto fifteen per cent in case of transport vehicles.
However, such concession shall be available upto eight years from the date of first registration in case of transport vehicles, and upto fifteen years from the date of first registration in case of non-transport vehicles. As such, no concession in the motor vehicle tax will be provided after these specified periods.
This concession will come into effect from 01 April, 2022.
Through a notification dated October 5, 2021, Government has amended Central Motor Vehicles Rules, 1989 to waive the fee payable for issue of the certificate of registration for a new vehicle, which is registered on submission of the “Certificate of Deposit”.
Besides, this notification has also substantially increased the fee payable for renewal of the certificate of registration and the certificate of fitness for motor vehicles older than 15 years. Please note that as per the Motor Vehicles Act, 1988, certificate of registration of motor vehicle is valid for a period of 15 years from the date of its issue. Such certificate can be further renewed for a period of 5 years. Government has also specified penalty to be levied for delay in the renewal of certificate of registration and the certificate of fitness.
These aspects will come into effect from 01 April, 2022.
A substantial increase in the fees for renewal of registration and fitness certificate for motor vehicles older than 15 years intends to discourage owners from continuing to use such vehicles, and to simultaneously encourage them to scrap older vehicles and replace them with new vehicles using waivers, benefits or concessions available on the submission of “Certificate of deposit” (as provided on the submission of a vehicle for scrapping) as announced by the Government.
The Policy is a welcome first step towards phasing out older vehicles from Indian roads, especially the proposal of a single window clearance for RVSF and ATS which will avoid unnecessary delays and nudge vehicle owners to replace older vehicles with new ones. The commercial viability and modalities in this regard will be clearer in the days to come. However, it is worth noting that the process of dismantling and recycling is seen by many as an environmentally polluting process and therefore it will be crucial to ensure that the industry adopts and creates the best processes and infrastructure to ensure that there is no pollution from older motor vehicles during the scrapping process as that would defeat the very purpose for which this system was devised. Therefore, it is important to ensure that the entire exercise is simple, efficient, transparent and environment-friendly.
This article was originally published in Mondaq on 25 November 2021 Co-written by: Nawneet Vibhaw, Partner; Himanshu Pabreja, Associate. Click here for original article
Contributed by: Nawneet Vibhaw, Partner; Himanshu Pabreja, Associate
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
The Bar Council of India does not permit solicitation of work and advertising by legal practitioners and advocates. By accessing the Shardul Amarchand Mangaldas & Co. website (our website), the user acknowledges that: