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The Ministry for Road Transport and Highways (MoRTH) is seeking an excise duty reduction of up to 50 per cent on new cars for all those who voluntarily scrap their old cars. Nitin Gadkari, the Minister For Road Transport and Highways will be meeting with the Finance Ministry on August 24, 2016 regarding the incentives under the Voluntary Vehicular Fleet Modernisation Policy (VVMP).
The excise duty cuts could bring down car prices by up to 15 per cent. To apply for the tax reduction, owners submitting their old cars for recycling at authorised scrapping centres will be required to produce corresponding documentation and registration papers. After the papers are verified, the price for the scrap will be assessed and paid to the owners. They will also receive a certificate which will make them eligible for subsequent discounts on new cars. The VVMP scheme is applicable to cars registered before April 2005. We’re not sure if this also extends to cars that changed hands over the last decade but registered before 2005.
The first draft of the policy has already been drawn by the MoRTH and it also includes a provision for a complete excise duty exemption for new additions to state transport bus fleets. The move is aimed at encouraging the transition to newer, less polluting public buses with larger passenger capacities in order to decongest roads and reduce vehicular emissions caused by the old relics that the public transport system is comprised of.
It’s important to note that at this point, there isn’t a single authorised scrapping centre set up in the country. Currently, Mahindra has tied up with MSTC in order to set up an auto shredding facility. But the Integrated Automotive Recycling Centre would begin operating by 2018, at the earliest. Even if the Government expedites the passing of the Voluntary Vehicular Fleet Modernisation Policy, like it did the amendments to the Motor Vehicles Act, there needs to be more clarity regarding the fate of the ‘scrapped cars‘.
The Government estimates that the scheme could replace around 28 million vehicles on the road with ones that comply with new emissions norms, bringing down vehicular emission by 25-30 per cent and annual fuel consumption by 3.2 billion litres.