The Ministry of Transport and Highways (“Ministry”) notified the draft Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021 dated March 15, 2021 (the “RVSF Rules”) in furtherance to comprehensive vehicle scrapping and incentive policies. The RVSF Rules, though presently a draft set of legislation, shall come into force upon its finalization and subsequent notification by the central government. Nevertheless, the RVSF Rules, in its present form, provides a credible framework to comprehend the direction and the manner through which the comprehensive goal of overhauling the vehicle scrapping and incentivization concerning vehicles in India shall be achieved. The RVSF Rules are one of many notifications, some of the others being various notifications towards amending Central Motor Vehicles Rules, 1989 (“CMVR”), intending to achieve the aforesaid larger goal.

The RSV Rules prescribes the procedure of establishment of vehicle scrapping facility, the procedure of scrapping of vehicles, the class of vehicles eligible for scrapping, and other ancillary provisions. The RVSF Rules shall be applicable to registered owners of the vehicles, automobile collection centres, automotive dismantling, scrapping and recycling facilities, and recyclers of all types of automotive waste products, that is to say, the application of the RVSF Rules shall be upon all kinds of entities engaged in the collection, dismantling, scrapping and recycling of vehicles and parts thereof.

REGISTERED SCRAPPER – THE CONCEPT

The RVSF Rules formally introduce, inter alia, the concept of “Registered Vehicle Scrapping Facility” (“RVSF”), “Registered Scrapper” and “Scrapping”.

Registered Vehicle Scrapping Facility - Registered Vehicle Scrapping Facility shall mean any establishment engaged in dismantling and scrapping operations of the vehicles and registered with the designated registration authority for the purpose. The aforementioned designated registration authority shall be Commissioner (Transport) or any other officer designated by the government of the state or union territory, which shall issue ‘Registration for Vehicle Scrapping’ upon registration of such establishment.

Registered Scrapper -  Registered Scrapper shall mean an entity owning and operating a  Registered Vehicle Scrapping Facility.

Scrapping – Scrapping shall mean the entire process of depolluting, dismantling, segregation of material, safe disposal of non-reusable parts of an end of life-vehicle, followed by the issuance of a ‘Certificate of Vehicle Scrapping’ to the registered owner of a motor vehicle (end of life-vehicle) to recognize the final disposal of such motor vehicle.

SCRAPPING – VEHICLES CRITERIA

The RVSF Rules classifies and prescribes criteria for vehicles that may be offered for Scrapping with a Registered Scrapper:

  1. Vehicles which have not renewed their Certificate of Registration in accordance with Rule 52 of the CMVR.
  2. Vehicles which have not been granted a certificate of fitness in accordance with Section 62 of the Motor Vehicles Act, 1988. Though the RVSF Rules mentions fitness certificate under the Motor Vehicles Act, 1988, the said certificate is provided under Rule 62 of the CMVR, thus, the error appears to be inadvertent and may be corrected in the final RVSF rules. It may be noted that the fitness of commercial vehicles may be tested at the Automated Fitness Centres established for the purpose.
  1. Vehicles, the registration of which is cancelled under the provisions of the Motor Vehicles Act, 1988 or due to any order of a court.
  1. Vehicles that are self-declared as scrap by the registered owners due to any circumstances, including fire, damage, accident, and others.
  1. Vehicles declared as obsolete or surplus or beyond economic repair by any central/state organizations of the government.
  1. Vehicles bought in auction for scrapping by any agency, including by a Registered Scrapper.
  1. Vehicle that is certified by its owner as having outlived its utility or application.
  1. Vehicles that are rejected by the manufacturers and duly certified by the manufacturer while offering the same for scrapping.
  1. Vehicles that are auctioned, impounded, and/or abandoned by any enforcement agency.

It may be noted that the RVSF Rules define the end-of-life vehicles (“ELV”) to include Vehicles fulfilling any of the criteria under para 1 to 4 above, and therefore, such ELV may be offered for Scrapping.

Thus, any vehicle that fulfils any of the criteria laid hereinabove may be offered for Scrapping before a Registered Scrapper, which shall perform the Scrapping activities in accordance with the prescribed rules and guidelines.

 

Press Release

The Ministry vide press release dated March 18, 2021[1] (“Press Release”) elaborated further on the registration and fitness of vehicles with respect to RVSF Rules, and for the purpose of Scrapping, and proposed as follows:

  1. Commercial Vehicles: A Commercial Vehicle shall be de-registered after 15 years of initial registration in the event of failure to furnish a fitness certificate. Further, an increased fee shall be applicable for fitness certificate and fitness test for commercial vehicles after 15 years of initial registration.
  1. Private Vehicles: A Private Vehicle shall be de-registered after 20 years of initial registration in the event of failure to renew registration certificate with respect to such vehicle or in the event such vehicle is found unfit. The term ‘unfit’ has not been elaborated in the Press Release and may be defined in a subsequent notification. Further, an increased fee shall be applicable for re-registration of a private vehicle after 15 years of initial registration.

Government Vehicles: All vehicles owned by the central government, a state government, a municipal corporation, panchayats, state transport undertakings, public sector undertakings and autonomous bodies with the union and state governments may be de-registered and scrapped after 15 years from the date of registration. It may be noted that the Press Release proposes de-registration of vehicles owned by the government or its affiliates after 15 years of registration; however, the same may not be compulsorily given the text of Press Release. Any subsequent notification may bring further clarification on the subject.

REGISTRATION

Process. An entity proposing to set up an RVSF shall apply to the designated ‘Registration Authority’ of the relevant state/union territory in prescribed ‘Form – 1’ along with the processing fee of INR 1,00,000/- (or any other amount as may be prescribed), and an earnest money deposit of INR 10,00,000/-. The designated Registration Authority shall be required to dispose-off the application within 60 days from the date of application. Upon accepting the said application, a Registration Certificate in ‘Form – 1A’ shall be issued by the designated Registration Authority. In cases where the application is rejected by the designated Registration Authority, the aforementioned earnest money deposit shall be refunded.

It may be noted that an entity proposing to make an application for setting up an RVSF shall fulfil the eligibility conditions prescribed under Rule 5 of the RVSF Rules before making such application before the designated Registration Authority. Such eligibility conditions are specified hereof under Appendix – I for ready reference.                        

Single Window Clearance. The Government proposes setting up a dedicated portal for single-window clearance for the applications to set up an RVSF. All necessary approvals required to establish an RVSF, including approvals by the State Pollution Control Board, Labour Department, and any other departments, shall be provided through such a portal. A tentative timeline of 60 days is proposed under which the state governments shall approve the applications (including internal approvals such as from pollution board, labour departments and others).

Validity. The Validity of registration of RVSF shall be 10 years with further renewal of an additional period of 10 years each allowed subject to Registered Scrapper complying with the applicable laws.

SCRAPPING PROCEDURE

The RVSF Rules envisages a detailed process to be adopted and complied by an RVSF for the Scrapping of eligible vehicles. Such process involves the establishment of a ‘Scrapping Yard’ with prescribed specifications, the procedure of Scrapping (technical and otherwise) to be adopted, with other responsibilities and safeguards upon RVSF to be complied with.

After scrapping a vehicle, Registered Scrapper shall issue a digital ‘Certificate of Vehicle Scrapping‟, including a digital photograph of the cut out of the chassis, in prescribed ‘Form-4’, duly evidencing Scrapping of a vehicle in a compliant manner, and shall update and inform the appropriate authorities in the prescribed manner.

OTHER ASPECTS – RVSF RULES

Inspection. Registration Authority (or any other designated officer) is empowered to make physical inspections and site visits at the RVSF in the event where an RVSF fails to comply with RVSF Rules and other ancillary provisions, where such Registration Authority (or any other designated officer) receives a public complaint or a report of non-compliance by the appropriate authority. However, any such inspection and site visit shall be made after giving the Registered Scrapper an opportunity to submit its response and clarification on the aforementioned complaint or report. After such inspection, a report shall be generated against which the Registered Scrapper shall be given an opportunity of being heard. In the event where the submissions of the entity is found inadequate, the Registration Authority may suspend or cancel the Registration Certificate of RVSF.

Audit. RVSF Rules prescribes an annual audit of RVSFs by a competent authority to audit compliance with the RVSF Rules and other relevant provisions. Such audit shall include (i) Regulatory and Compliance Audit and (ii) Audit of the Mass Flow Statement filed in the Annual Returns by the RVSF as may subsequently be notified. It may be noted that the concept of ‘Audit of the Mass Flow Statement’ has not been defined in the RVSF Rules. The Audit Report shall be uploaded on the VAHAN Portal for each financial year on or before the succeeding May 31. RSVF shall be required to comply with the observations set forth in the Audit Report and shall resolve the same within 2 months (with an extension of 1 month allowed at the discretion of the competent authority).

Appeal. Registered Scrapper is entitled to appeal before the designated authority against any order of cancellation of registration of RVSF, or against forfeiture of aforementioned earnest money deposit, where such appeal may be filed within 30 days (accompanied with a fee of INR 10,000) of the date of order of cancellation or forfeiture. Such appeal may be disposed-off in 14 days by the designated authority.

EXTANT PROVISIONS – AUTHORISED SCRAPPER

Notification. The Transport Department, Govt. of NCT of Delhi, vide notification no. DC/OPS/TPT/1109/2017/3701-08 dated August 24, 2018, notified the ‘Guidelines for Scrapping of Motor Vehicles in Delhi’ (“Delhi Notification”) and introduced the concept of ‘Authorised Scrapper’ and envisaged provisions for disposal and scrapping of vehicles in National Capital Territory of Delhi.

Definition - Authorised Scrapper. The Delhi Notification defines ‘Authorised Scrapper’ to mean any person, firm or company to whom a ‘Scrapping License’ had been issued by the Transport Department, Government of NCT of Delhi. Any person, firm or company shall be licensed as an ‘Authorised Scrapper’ after the eligibility conditions and licensing procedure as prescribed in the Delhi Notification is duly complied with. The licensing as an ‘Authorised Scrapper’ requires an applicant to comply with a detailed infrastructural requirement before making any application for Authroised Scrapper.

ELV. The Delhi Notification requires that any vehicle registered in Delhi shall be scrapped only by an Authorised Scrapper. Further, only such a vehicle may be scrapped which is classified as an ELV. ELV for the purpose of Delhi Notification shall mean any diesel vehicle which has completed 10 years of registration, any petrol vehicle which has completed 15 years of registration, and a vehicle that has become unusable due to accidents or otherwise.

Scrapping. The Delhi Notification prescribes a detailed scrapping procedure of scrapping of vehicles by an Authorised Scrapper, which, inter alia, requires Authorised Scrapper to issue ‘Scrapping Certificate’ to the registered owner of the vehicle duly evidencing scrapping of the vehicle in accordance with the Delhi Notification.

De-registration Orders. The Government of NCT of Delhi, vide circular dated May 26, 2020[1] and February 26, 2021[2], has issued directions to all the Motor Licensing Officers (MLOs) that all cases for de-registration of end-of-life vehicle be considered when accompanied with a letter from Authorised Scrapper. Thus, it may be concluded that any de-registration of a vehicle shall be compulsorily followed by scrapping by an Authorised Scrapper.

 

Our Remarks

The National Capital Territory of Delhi already has a statutory notification in force almost 3 years prior to the central notification for the scrapping of vehicles. In pursuance to Delhi Notification, the appropriate Licensing Authority has been time and again issuing licenses to private entities, thereby, rendering them as ‘Authorised Scrapper’. It is plausible that upon enforcement of RVSF Rules, which would have nationwide applicability, the Delhi Notification might be rendered redundant. The fate of the existing Authorised Scrapper is highly indeterminate and shall require explicit clarification from the government. Numerous queries, including the requirement of re-registration by Authorised Scrapper under the RVSF Rules (after complying with enhanced infrastructural requirements), remain unanswered at this stage.

 

[1] Circular no. DC/Ops/Tpt/292-II/2014/075481999/1894-1898

[2] Circular no. DC/OPS/TPT/1109/2017/Part – II/075543192/19127

OTHER PROPOSALS – PRESS RELEASE

In order to further the object of vehicle scrapping policy and the ancillary objective framework, the Ministry vide Press Release has highlighted various other proposals. Some of the other major proposals are stated hereinbelow:

  1. Incentivisation
  1. Scrap Value for Scrapping of a vehicle to be 4-6% of ex-showroom price of new vehicle.
  2. Road- tax rebate of up to 25% for personal vehicles and up to 15% for commercial vehicles by state governments.
  3. Discount of 5% on purchasing a new vehicle by vehicle manufacturers against furnishing the Certificate of Vehicle Scrapping.
  4. Waiver of registration fee for purchase of new vehicle against the Certificate of Vehicle Scrapping.

 

  1. Public-Private Partnership
  1. Setting-up of RVSFs on Public-Private Partnership model (PPP model);
  2. Setting-up and developing ‘Integrated Scrapping Facilities’ across India as highly specialized centres for scrapping, and where different scrapping technologies can be synergized together. The term ‘Integrated Scrapping Facilities’ has not been defined, and the concept may be elaborated on in subsequent notifications.
  3. Setting-up of Automated Fitness Centres for fitness testing and certification of vehicles on a PPP model.

 

  1. Timelines

The government proposes to implement the comprehensive vehicle scrapping policy in a phased manner, and therefore proposes the timeline specified below:

  1. Rules for Fitness Tests and Scrapping Centres: October 01, 2021
  2. Scrapping of government and PSU vehicles above 15 years of age: April 01, 2022
  3. Mandatory Fitness Testing for Heavy Comm. Vehicles: April 01, 2023

Mandatory Fitness-Testing (Phased manner for other categories): June 01, 2024

CONCLUDING REMARKS

A fair perusal of the RVSF Rules and other press releases suggest that the comprehensive vehicle scrappage policy could be a major game-changer in the automobile sector. The ambitious move to overhaul the vehicle scrappage structure in India could attract, by one estimate[4], around INR 10,000 crores, and could bring about 35,000 in job opportunities. Another idea is to discard the unfit and older vehicles contributing adversely to the environment through excessive pollution, thereby, furthering remedial actions in pursuance of environment safety commitments. It is estimated[5] that the comprehensive vehicle scrappage policy shall cover about 51 lakh light motor vehicles (LMV) that are above 20 years of age, 34 lakh LMVs that are above 15 years, and about 17 lakh medium and heavy motor vehicles which are above 15 years and currently without valid fitness certificates, under its purview, thereby, bringing about an immense opportunity for the automobile sector, especially given the replacement opportunities for such vehicles.

 

All in all, it appears that the much-talked and long-delayed scrappage policy is finally taking its shape. However, given the massive irregularities and ambiguities in the current notifications, multiple subsequent notifications are awaited for want of lucidity and coherence. In order to meet the declared timelines, a lot needs to be deliberated and worked upon.

 

Authors: I Abhishek Bansal, Partner ([email protected]) I Pavish Singhla, Senior Associate ([email protected]) I Malvika Aggarwal, Intern ([email protected]) I ACUMEN JURIS I

Practice Areas: I Corporate & Commercial I Acquisitions & Investments I Arbitration & Dispute Resolution I

 

Disclaimer- This Article is for information purposes only, and the views stated herein are personal to the author, and shall not be rendered as any legal advice or opinion to any person, and accordingly, no legal opinion shall be rendered by implication. The Article does not intend to induce any person to omit, commit or act in any particular manner, and that you should seek legal advise before you act on any information or view expressed herein. We expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this Article.

 

 

[4] Press Release dated March 18, 2021 by Ministry

[5] Press Release dated March 18, 2021 by Ministry

ELIGIBILITY CONDITIONS APPENDIX - I

Any entity making an application before the Registration Authority for setting up an RVSF shall fulfil the eligibility conditions enlisted hereinbelow:

  1. The RVSF be owned and operated by any legal entity, which may include (i) person, or (ii) firm, or (iii) society, (iv) trust, established under applicable laws. The term ‘person’ appears to include a company incorporated under the Companies Act.The legal entity must possess (i) Certificate of Incorporation, (ii) Valid GST registration, and (iii) Valid PAN.
  1. The legal entity must have applied, or be in possession of, ‘consent to establish from relevant state/union territory authorities.
  2. The legal entity shall meet the prescribed minimum technical requirement for collection and dismantling Centers as per Central Pollution Control Board Guidelines.
  3. The legal entity shall have the competent workforce and appropriate equipment to carry out the de-pollution and dismantling activities in a safe and environmentally responsible manner. In the absence of express prescription in the RVSF Rules, a reference may be taken in the context of scrapping procedure and scrapping yard requirements envisaged in the RVSF Rules. 
  4. The legal entity must undertake to obtain prescribed quality certifications of ISO 9001(quality management system)/ISO 14001(environmental certification)/ISO 45001 (occupational health and safety) within 12 months of commencement of operations.
  5. The legal entity shall possess, or provide an undertaking to obtain, ‘consent to operate’ from the State Pollution Control Board, within six months from the commencement of operations.
  6. The legal entity shall undertake to comply with all applicable acts/rules, including all the labour codes as may be applicable.
  7. The legal entity shall undertake to comply with all applicable acts/rules, including all the labour codes as appropriate.
  8. The legal entity should provide evidence of the availability of adequate useable land area in the ‘Orange’ category industrial zone of the state or union territory by way of ownership or agreement to sell or agreement for a lease of a minimum period of three years. The exact adequacy requirement of the land area has not been notified yet.
  9. The legal entity shall possess necessary cybersecurity certifications as prescribed under the RVSF Rules.
  10. The legal entity shall provide the approved plant layout and the building plan. The specifications of the same have not been notified yet.