VLT Manufacturers Up Against Notification Seeking Empanelment and Registration

The Telematics Association of India (TAi), said that the recent notification of the Department of Transport, UP, requiring the empanelment of VLT device suppliers in the state is infringing upon the freedom of choice given to the vehicle owners of the state under Rule 125-H of the Central Motor Vehicle Rule,1989 (CMVR). Rule 125-H clearly states that vehicle owners will have the freedom to choose what Vehicle location device they should install as long as they are AIS-140 certified.

UP government without following the principle laid down in the judgment of Allahabad High Court in Preeti Dubey v. Union of India, decided on 24-02-2021 and Central Motor Vehicle Act,1988 which clearly states that the State Government is barred from making any laws in respect of the subject matter that falls within the list has imposed severe restrictions on manufacturers of Vehicle Location Tracking (VLT) devices, which are AIS-140 Compliant.

The association in a representation made to the DOT, UP, and copy marked to the Union Minister of Surface Transport, Highways and MSMEs Nitin Gadkari, gave a detailed analysis of the pernicious impact of the impugned notification and called for its immediate withdrawal.  It will not only thwart the impetus given by prime minister Narendra Modi for the small and tiny sectors in India but also would set a bad precedent of circumventing well-thought-out central rules as well as the judgment of Hon’ble High Court judicature at Allahabad through arbitrary and ill-conceived state-level notifications.

Through its notification issued on 5th January 2022, the UP Department of Transport made mandatory empanelment and registration of manufacturers of Vehicle Location Tracking (“VLT”) devices (AIS-140 Compliant) in the state.  The end-users of this device are manufacturers of public service vehicles, national permit vehicles, and vehicles carrying oxygen (oxygen tankers and argon and nitrogen tankers converted to carry liquid medical oxygen) in the State of Uttar Pradesh.

The notification of the DOT has wrongly incorporated the requirement of Original Equipment Manufacturers (OEMs) approval for empanelment of VLT devices manufacturers, the Association asserts. This, in practice, will benefit only certain vehicle manufacturers, adversely impacting the right of the vehicle owners in the State at the cost of the vehicle owners who, as per rule 125-H, had the freedom to choose from a wide range of VLTs at competitive market prices. Further, now the vehicle manufacturers will be able to void the warranty of the vehicle if non-approved devices are fitted in the vehicle nullifying the effect of proviso 2 section 52 of the Act inserted vide Motor Vehicle Amendment Act, 2019. Also, such a requirement of OEM’s approval will not only create a monopolistic market but will adversely impact the State by creating restrictive market conditions. Most of the present VLT device manufacturers with AIS certification shall not be able to sell their products despite having all regulatory approvals due to non-approval by a private party i.e. vehicle manufacturers.

TAi says that the DOT while issuing the impugned notification has blatantly encroached on the area of rule-making on subjects reserved for the Central Government under the Motor Vehicles Act, 1988. The approval of vehicle manufacturers for empanelment shows that DOT has diluted the intended benefit accorded to vehicle owners enshrined in various provisions of the Motor Vehicles Act, the Association maintains, adding that the DOT has completely misread the Standard Operating Procedure (SOP) to the detriment of vehicle owners.

The imposition of these criteria by DOT is contrary to the public policy of promoting MSMEs. It is creating restrictive market conditions within the State that will benefit only a handful of larger organizations and vehicle manufacturer(s) at the cost of MSME(s) and the vehicle owners within the State. The eligibility criteria can erode into the ambit of arbitrariness, creating a distorted market where supply will vest in the hand of a few empanelled vendors, thereby restricting the right of the vehicle owners in the state to negotiate better prices and services. It can also lead to artificial market shortages due to the limited suppliers of VLT devices in the State. Further, by imposing the financial barrier in the form of a performance bank guarantee to be given by the applicant will deter MSME(s) from participating in the said empanelment process.