Taxing older vehicles: A Way forward

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Syllabus: GS 3

Synopsis: Raising the tax on older vehicles will help in reducing pollution.

Introduction

The Centre has planned a policy to raise road tax on vehicles of a certain age from April 1 next year. This has the potential to renew a big part of India’s vehicles on the road, raising fuel efficiency, and improving safety standards. The proposal is

• Commercial transport vehicles will have to pay 10%-25% extra on road tax after 8 years while renewing the fitness certificate. While for personal vehicles it will implement after 15 years.
• Public transports are given concessions.  While hybrids, electrics and farm vehicles are exempt.
• Higher tax on diesel engines and in most polluted cities is also proposed.

What will be India’s approach to make this initiative a success?

India’s scheme depends on penal taxation to motivate owners to scrap their old vehicles. However, there are some prerequisites for its success;

• Firstly, the additional tax suggested should be bigger than the resale value of the polluting vehicle. It would make its disposal a more viable option, this would make the approach work.
  • Disposal should be done with enough safeguards to ensure that it is really scrapped and recycled under a monitored system.
• Secondly, equity features can be built into the scheme. It can be done by offering a discount to marginal operators such as auto-rickshaw drivers. It would be similar to the 2009 incentive given under the JNNURM scheme for buses.
• Thirdly, Road Transport Minister Nitin Gadkari planned a reduction in automobile prices of 20% to 30%. It would be done by the recovery of scrap steel, Aluminium and plastic; and recycling it further.
  • Now, The capacity building in the organised sector can be focussed for scrap collection and processing. It will manage the task of materials recovery, efficiently.
• Fourthly, the vehicle registration database for all States should be updated. It will show the actual numbers of old vehicles on the road. Such data will help target scrappage policy benefits better.

The way forward

• India’s policy to eliminate polluting fuel consumers took a lot of time, and States should see the value of operationalizing it as planned. New vehicles and cleaner fuels should help clear the toxic air in cities and towns and make roads safer.