Budget bites on vehicles

Fails to restrain use of subsidised diesel in private diesel cars

By Anumita Roychowdhury
Published: Friday 16 March 2012

Budget 2012 is a mixed bag. It hikes taxes on big cars and SUVs. But the move is incomplete, as it has failed to take steps to stop misuse of diesel fuel subsidy by cars. The Union Budget 2012 has marginally hiked the excise duty on large cars from 22 per cent to 24 per cent. MUVs and SUVs will attract higher duty—up to 27 per cent. But this urgently needs support to discourage fuel guzzling and reduce toxic emissions.

At the same time, it is unacceptable that while the budget speech of the Union finance minister says that it needs to reduce subsidy bill to 2 per cent of the GDP in three years, it fails to restrain use of subsidised diesel in private diesel cars. If this is not controlled, both the government as well as public sector oil companies will continue to bleed. In fact, the budget speech states that the government has absorbed the duty reduction in the petroleum sector with total annual revenue losses of Rs 49,000 crore. Will the government continue to let its treasury bleed to support the massive dieselisation of the car segment?

The budget has ignored that dieselisation is rapidly growing in the small and medium segments and has left it untouched. The proposed tax hike will only affect cars with engine sizes of more than 1,500 cc for diesel and 1,200 cc for petrol cars. But this will hardly make any difference in the popular models in the small and medium car segments where sale of diesel models is as high as 50-75 per cent. Despite the recession, diesel car sales have jumped 34 per cent in 2010-11.

This inaction on diesel cars will add to our health budget. The media is already abuzz with spiraling cancer risks in Indian cities. Policies must reduce environmental risk factors that include toxic diesel emissions. The WHO, the International Agency for Cancer Research, California Air Resources Board and the US Environmental Protection Agency have branded diesel particulates as human carcinogens and implicated them for lung cancer that is also rising in our cities.

Our fiscal pundits must take note of the a massive global study on heavy exposure to diesel exhaust, published in the Journal of the National Cancer Institute this March, that confirms the link between lung cancer deaths in miners and diesel exhaust. According to the National Cancer Institute in the US, this landmark study’s findings suggest that the risks may extend to other workers exposed to diesel exhaust, and to people living in urban areas where diesel exhaust levels are elevated. India must take note of these evidences to restraint use of poor quality diesel in cars.

The new proposal for the vehicle sector must be reviewed for corrective action to discourage use of subsidised diesel in the car segment. This only benefits the rich car owners.



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