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Congestion, road, fuel tax on the anvil?

Congestion, road, fuel tax on the anvil?
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First Published: Fri, Dec 21 2007. 12 18 AM IST

Updated: Fri, Dec 21 2007. 12 18 AM IST
New Delhi: If the Indian government actually signs off—and that will be a big if—owning certain cars and parking any cars inside cities might become quite expensive.
A policy to govern public transport, which weighs the adverse effects of greenhouse gas emissions on climate, drafted by a high-level government committee and being considered by the Planning Commission, the apex planning body in India, is ambitiously proposing to discourage “personalized mode of transport” while pushing public transport as the alternative. It also seeks to slap additional excise duties on automobiles that do not meet prescribed fuel efficiency norms.
Mint reviewed a copy of the draft policy document. The policy’s wish list also proposes a congestion tax, levy of higher parking fees, increased vehicle registration charges, increased fuel tax as well as an annual road tax based on carbon emissions.
The draft policy also proposes to link financial payments for development of cities under the Jawaharlal Nehru National Urban Renewal Mission, a Rs50,000 crore Centrally sponsored scheme, to the ability of state governments to raise a dedicated “transport fund” by imposing an additional cess on automobiles when they are registered by vehicle owners.
SIGN POSTS (Graphic)
It is unlikely that such sweeping suggestions, including those that will impact one of India’s booming manufacturing sectors—car manufacturing—will be implemented without significant debate or efforts by various lobbies to dilute or alter various recommendations.
“We have not seen the policy yet, so we can’t comment,” says Dilip Chenoy, director general, Society of Indian Automobile Manufacturers, an industry lobby group. “We hope the government will incl-ude the industry in discussions before finalizing anything.”
The committee is chaired by Anwarul Hoda, member (infrastructure) of the commission and includes R.K. Pachauri, head of the Intergovernmental Panel on Climate Change, and director-general, The Energy and Resources Institute (Teri).
It was set up on the recommendation of the Prime Minister Manmohan Singh’s council on climate change and will be part of the national action plan on climate change.
One of the conclusions at the recent United Nations sponsored talks on climate change in Bali, Indonesia, require developing nations to draw up national plans and policies on mitigation of CO2 emissions and climate change.
“All ministry representatives at the meeting agreed to almost all of the recommendations,” claims Sunita Narain, director of the Centre for Science and Environment, an activist environmental group, who is a member of the committee that drafted this paper “There wasn’t a single point of disagreement. The policy incentivises states to move towards public transport with clear targets, and also disincentivise personal mode of transport by clear strategy of dividing road space according to passenger load, higher parking charges.”
Mint could not independently confirm the consensus. But, Hoda confirmed the draft policy recommendations.
“We are in the process of drafting this policy, which is sensitive to climate change, so that we do not burn more fuel that what is required and necessary,” he said. “We are hopeful of submitting the final report within this month to the Prime Minister.”
To discourage personal vehicles on some city corridors, the policy recommends limiting parking space in city centres and limiting availability of road space for personal vehicles. A congestion tax in busy city centres, such as those being levied in London and Singapore, is also being suggested. A special regulatory body is also being mooted, one that could impose stiff fines, suspend, or even cancel licenses for violating rules related to use of city roads by private vehicles.
“Studies show that energy consumption in motorised individual traffic is 10 times higher than demand oriented public transport system,” say the draft policy recommendations. “On a per passenger basis, a car uses six times more energy than a bus.”
While India’s government is already pushing for stipulating fuel economy standards for vehicles, the committee has recommended that the fuel economy of new cars, commercial vehicles and two-wheelers should improve by 8% every year in the next five years.
Also proposed is a “gas guzzler tax” in the form of an 8% excise duty. “Vehicles, which come up to 90% of the average efficiency (standards to be prescribed by a government body) should be taxed 8% and, as the fuel economy drops, a maximum of up to an additional 24% excise duty can be charged,” the recommendations say.
The draft policy particularly targets non-commercial diesel vehicles, recommending that manufacturing of diesel cars, for instance, be restricted in India.
According to Asian Development Bank estimates of Indian fuel consumption, road vehicles in 2005 consumed 58 million tonnes (mt) of fuel per year and in 2025, that consumption is expected to reach 221mt before hitting 371m by 2035.
Similarly, CO2 emissions in 2005 from the transport sector were estimated at 208mt, and are expected to increase to 721mt by 2025 and then on to 1,212mt in 2035.
The draft policy notes that the government or public sector’s share of transport systems has come down to 10-15% due to unremunerative routes, and says that less efficient private vehicles have taken over the role of public transport, leading to congestion and pollution.
The policy suggests that the private sector, particularly major industrial groups, should be encouraged to participate in auctions of public transport systems and contracts awarded to those who seek the lowest subsidy from the government.
One World Bank estimate shows that the tax burden per vehicle per kilometre is 2.3 times higher on buses as compared to cars. The committee has agreed that this should be rationalized.
“At the Central government level, we believe that the excise duty on commercial vehicles is too high and the finance ministry will lower it,” said Hoda. “Even the state government will have to reduce taxes on modes of public transport by reducing the registration tax of commercial vehicles.”
The urban development ministry has already advised states on additional registration fees and cess on cars and two-wheelers for a dedicated transport fund. Now, the draft policy is recommending that the Jawaharlal Nehru Mission be linked to states creating such a fund.
“The ministry of urban development has said that states can get money from this (mission) but, only if an action taken report is given by states that the transport fund has been created,” added the draft.
(Utpal Bhaskar contributed to this story.)
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First Published: Fri, Dec 21 2007. 12 18 AM IST