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:
Regulatory measures taken by the Government
- Regulatory framework for vehicle scrappage facilities
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, 20211 (“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”):
- Applicant shall apply to the Registration Authority of the concerned State Government or Union Territory Administration, where RVSF is intended to be located, along with the specified fee.
- State Government or Union territory Administration shall dispose of the application within 60 days from the date of application including all internal approvals required from its various departments. Beyond a period of 60 days, such application will be deemed as approved.
- Central Government will operationalise a single window clearance for the registration of RVSF within 6 months from the date of notification of RVSF Rules. Until then, State Government or Union Territory Administration will manually process all applications. Subsequent to the operationalisation of the single window, all subsequent approvals necessary for RVSF will be granted through this portal.
- The registration granted to RVSF shall be valid for an initial period of ten years. It will be renewable for another ten years at a time, subject to compliance by RVSF with certain conditions specified in the RVSF Rules.
- RVSF can be owned and operated by any legal entity, be it persons, firm, society, company or trust, having specified identification documents.
- Entity should have applied for or obtained an approval for consent to establish from the Registration Authority of the concerned State Government or Union Territory Administration where the RVSF is intended to be located.
- Entity should possess or undertake to obtain the consent to operate from the relevant State Pollution Control Board within six months from commencement of operations.
- Entity should comply with minimum technical requirements for collection and dismantling centres as per Central Pollution Control Board guidelines.
- Entity should undertake to obtain specific quality certifications within twelve months from commencement of its operations.
- Entity should have competent manpower and appropriate equipment to ensure collection, dismantling and recycling activities in safe and environmentally responsible manner.
- RVSF shall have to comply with environmental norms including the pollution control norms and with all other applicable laws.
Criteria of vehicles eligible for scrapping:
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.
Process of scrapping
- Registered owner or authorised representative shall hand over the vehicle to RVSF along with the required documents (such as registration certificate and PAN details). RVSF shall then carry out necessary verifications to determine the bona fide of such person before accepting the vehicle for scrapping.
- RVSF shall access the VAHAN database to make suitable entries regarding scrapping of the vehicle, and also facilitate the process of submission of the scrapping request electronically and transmission of registration certificate (defaced or punched) to road transport or regional transport office to get the vehicle deregistered.
- RVSF shall issue “Certificate of Deposit” to the registered owner or authorised representative which can be used to avail incentives and benefits for purchase of a new vehicle as determined by the Government. This certificate shall serve as proof of transfer of vehicle ownership to the RVSF. Once utilised, this certificate shall be stamped as cancelled by the agency or dealer and be recorded as such in the VAHAN database.
- RVSF shall pay the agreed amount to the registered owner or authorised representative for value of the scrapped vehicle.
- After completing the necessary treatment, RVSF shall issue a digital “Certificate of Vehicle Scrapping” for update of vehicle in the specified Government records.
- RVSF shall set up the scrapping yard and collection centre to handle, depollute and dismantle the end-of-life vehicles in the prescribed manner.
- RVSF shall maintain records regarding the transaction of vehicles and scrap generation and its responsible disposal to authorised recyclers, and all the machinery, equipment and apparatus in its premises.
- RVSF shall have the cut piece of the chassis number of the scrapped vehicle in safe custody for a period of six months from the date of issue of Certificate of Vehicle Scrapping.
- RVSF shall maintain a physical copy of all documents for a period of two years and a digital scanned copy of those documents for a period of ten years for record and examination during inspection.
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.
- Regulatory framework for automated testing stations
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.2
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.
The following are the key features of the ATS Rules:
- An ATS can be owned or operated by the State Government, or any company or association or body of individuals or individual or special purpose vehicle either directly or through public- private partnership.
- While a vehicle manufacturer or service station or automobile dealer or any person related to repair of vehicle or manufacturing or sale of vehicle or automobile spares cannot directly own an ATS, they can do so by forming a subsidiary or joint venture or a special purpose vehicle.
- The owner or operator of an ATS shall have a minimum net worth of three crore rupees during the last financial year and should have a positive profit after tax in the last two financial years.
- ATS premises should be either owned or taken on lease or hired by the owner for a period not less than ten years.
ATS Rules have provided for the following key aspects regarding the registration of ATS:
- The applicant shall apply to the registering authority along with the specified fee for the issue of Preliminary Registration Certificate for construction or establishment of ATS.
- Subsequent to the construction or establishment of the ATS and its successful pre-commissioning audit and assessment, the applicant can submit an application for grant of Registration Certificate to start ATS operation along with the specified fee.
- The determination for the registration shall be made by registering authority based on the applicant's compliance with requirements as specified in these rules.
- The validity period of the Preliminary Registration Certificate shall be specified in the certificate as mutually agreed between the State Government and the ATS owner or operator.
- The validity period of the Registration Certificate shall be ten years from the date of its issuance, and its renewal will be valid for five years from the date of renewal.
No conflict of interest
- The ATS shall act as a test-only facility and shall not provide any services related to repair of vehicles or manufacturing, or sale of vehicles, or automobile spares.
- Strict confidentiality shall be ensured for information regarding test results of any vehicle.
- There should be no financial or professional interests of the owner or operator of the ATS that may have the potential to influence or compromise their professional behaviour.
- ATS should have the specified space for defining testing lanes, testing equipments, information technology servers, parking and free movement of vehicles brought for testing, utilities like transformers, gensets, fire protection, etc. at the premises.
- ATS should also have the necessary cyber security certifications for safe access to the VAHAN database.
Testing and re-testing process
- The booking for fitness test at ATS shall be done through a portal to be established by the Central Government within 6 months from the date of notification of ATS Rules. Until then, such bookings can be done either manually or through the electronic portal of the relevant State Government or Union territory Administration.
- ATS shall carry out different tests on the vehicle as specified in the ATS Rules.
- The data related to fitness test and fitness test report shall be stored and processed in the specified manner. ATS shall also integrate the test results with the VAHAN database.
- Registered owner of the vehicle that fails any or all of the tests can apply for a re-test within a period of 30 days from such result, after getting identified defects rectified. The vehicle that is not re-tested within this period or fails again in the re-test will be declared an end-of-life vehicle.
- An Appeal against the test results can also be filed before Appellate Authority whose decision shall be binding and final.
Audit and assessment:
- The registering authority is required to conduct periodic audits and assessment of the ATS to monitor its performance and functioning through a National Accreditation Board for Testing and Calibration Laboratories (NABL) accredited agency. Surprise audits may also be conducted in exceptional situations.
- ATS will be required to rectify any discrepancy specified in the audit and assessment report within a period of 10 working days and submit a rectification report.
- Concession in the motor vehicles tax
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.
- Waiver of the registration fee and increase in fees for renewal of registration and fitness certificate
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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.