Government Mulls Imposing Green Tax on Vehicles Older Than Eight Years

Revenue collected through the tax would be used to set up facilities for monitoring pollution

January 27, 2021


The Minister of Road Transport and Highways (MoRTH), Nitin Gadkari, has approved a proposal to levy ‘Green Tax’ on old vehicles polluting the environment. MoRTH has forwarded the proposal to the states for consultation before it is formally notified.

According to MoRTH, transport vehicles older than eight years could fall under Green Tax’s purview (at 10-25 % of road tax) when their time comes up for renewal of fitness certificates. However, public transport vehicles, such as city buses, will see a lower Green Tax.

Green Tax will also be levied on personal vehicles when renewing registration certification after 15 years. A higher Green Tax (50% of Road Tax) would be levied on vehicles registered in highly polluted cities.

Different tax rates will be applicable depending on the fuel (petrol/diesel) and type of vehicle. Strong hybrids, electric vehicles, and vehicles that consume alternative fuels like CNG, ethanol, and LPG would be exempted from the new tax.

Vehicles used in farming, such as tractors, harvesters, and tillers, would also be exempted from the tax.

The revenue collected from Green Tax would be utilized for setting up state-of-the-art facilities in the states for emission monitoring.

According to MoRTH, the Green Tax will:

  • Dissuade people from using vehicles which harm the environment
  • Motivate people to switch to newer, less polluting vehicles
  • Lead to the reduction in pollution levels
  • Make the polluter pay for pollution

MoRTH also approved the deregistration and scrapping of vehicles over 15 years old and owned by government departments and public sector undertakings from April 1, 2022.

It is estimated that commercial vehicles, which constitute about 5% of the total vehicle fleet, contribute about 65-70% of total vehicular pollution. The older fleet, typically manufactured before the year 2000, constitutes less than 1% of the total fleet but contributes around 15% of total vehicular pollution. These vehicles pollute 10-25 times more than modern vehicles.

The Ministry for Road Transport has been taking creative steps to curb pollution in the country.

Last month, MoRTH had sought comments from the public on adopting E20 as an automotive fuel. It had also called for feedback on its mass emission standards. This fuel is a blend of 20% ethanol with gasoline and used in E20 compliant vehicles. It is effective in reducing carbon dioxide and hydrocarbon emissions. The fuel will help India reduce its oil imports while boosting energy security.

In July 2020, the National Institute of Transforming India (NITI) Aayog and the International Transport Forum of Organization for Economic Co-operation and Development (OECD) jointly launched a project to decarbonize India’s transport sector. The five-year project will help India develop a low-carbon transport system through new modeling tools and policy scenarios. It will design a tailor-made transport emissions assessment framework for India.

Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.