Sinha's trick

By Anil Agarwal
Published: Saturday 31 March 2001

If you saw tv programmes or read newspapers on the latest budget, you would have thought it is only for business leaders. The manner in which business editors and columnists went overboard to seek the response of the corporate community to Yashwant Sinha's latest hat-trick of budgetary numbers shows a mind-set that nobody else is important in modern India. If narrow-minded politicians or finance ministry officials and economists were to think that way, one could forgive them, but what does one say about those whose job is to enlighten the nation. Indeed the corporate sector plays an important part in the national economy but is that all there is to this country's economic vision?

With traffic congestion and bad air today marking almost every Indian city and town, Sinha has presented a budget that, I am convinced, will make the Indian people regret the day it was presented to parliament. The finance minister has both taxed a clean fuel like Compressed Natural Gas (cng) and given tax concessions to private automobiles without making any efforts to invest either in public transport systems or in cleaner private vehicles.

The budget is designed to serve narrow industrial interests while it will further degrade quality of life by creating even greater traffic mayhem and threatening the lives of hundreds of thousands of urban Indians because of greater vehicular pollution.

The very idea of taxing cng at a time when the Supreme Court is making a brave attempt to ensure that cng is used in commercial vehicles in Delhi in order to clean up its air and the Mumbai High Court is doing the same, almost amounts to a contempt of these courts. The total revenue Sinha will be able to net from Delhi and Mumbai where cng vehicles are currently used amounts to less than Rs 6 crore. Clearly, Sinha is telling us that clean air is not important. On the contrary, a Rs 2 per litre tax on diesel would have netted the Finance Minister some Rs 9,000 crore.

In fact, Sinha has opened up a major operational problem with his decision to tax cng . While natural gas is a product, cng is not. But if compression of natural gas is to be considered taxable, as Sinha suggests in his budget, then all natural gas can be taxed and it will have to be taxed at each stage of compression, from the point it is pumped into the pipeline to the point of the petrol pump where cng is compressed again and dispensed to vehicles. While cng is only used in vehicles, natural gas is used in large quantities in fertiliser and power plants. It will be interesting to see how Sinha gets out of this one.

The tax rebate that has been given to private vehicles like scooters and cars is even more reprehensible especially given the state of traffic in most Indian cities. If indeed private vehicles have to be promoted by the nda government at the expense of public transport, the same tax rebate could at least have been given to vehicles that have much higher emission standards than even Euro ii . From Indian automakers to foreign ones, all are now producing Euro iii cars for the European market but none of them will introduce them in India even though there are more serious air pollution problems here.

This is because these vehicles would be more expensive and, therefore, the companies will not introduce them in the price-sensitive market of India. But an emissions-based excise tax would have pushed manufacturers either to improve their engines to reduce emissions or introduce cleaner fuels like cng or lpg . Sinha has wasted an excellent opportunity to push manufacturers towards cleaner air.

Equally, the near total neglect of the rural sector means that Yashwant Sinha's budget has failed to provide programmes and schemes which will help to create more rural livelihoods. In the absence of serious efforts to create rural livelihoods, more and more people from villages will stream into Indian cities in the years to come, making it impossible to manage Indian cities. The budget presents the vision of a government. But this one presents an absolutely retrogressive vision for the future of this country.

This lack of vision is reflected also in the railway budget. Railways are a much more socially and environmentally friendly form of transport than road transport. Yet through its sheer mismanagement, the government of India has driven down the quality of rail transport in the country and, in the process, allowed road transport to grow. At the same time, keeping diesel prices low has given an even greater push to goods transport to move over to the road sector. Instead of correcting this by improving the rail sector, the cess on diesel is to be used by the Vajpayee government to increase more road space in the country by the Central government. The Vajpayee government is desperate to ape the West and even within the West, not the less insane Europeans but the more insane Americans, where public transport is considered communism.

Undoubtedly, we need to promote growth but we have to recognise that growth has to be balanced between urban areas and rural areas and between environmental conservation and economic development. Without this balance, Sinha will make life even more miserable for Indians. Wealth will come about but within a total social and environmental mess.

-- Anil Agarwal

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