Budget woes

Will a right environment be created by the budget this year?

Published: Friday 15 March 2002

The run-up to the budget is curiously silent on the environment front. But then, if the Union budget of last year, or for that matter the ones preceding it, is anything to go by, it is not surprising. The finance minister may once more end up playing to the corporate gallery. And that would be sad. The budget is said to present the vision of a government. But a blinkered view, where the real development issues are ignored, would only leave a skewered economic growth pattern. And this is witnessed year after year.

Today, in most developed countries there is a shift away from command and control methods to the use of suitably designed fiscal instruments that lead to environmentally desirable results in an economically efficient manner. This is where annual budgets of both the center and states must build in a set of measures that not only arrest the degradation of the environment but help improve it. The most effective solution to regulate and control the natural resources while safeguarding the livelihood issues of people can only come through proper use of fiscal instruments.

Now, how does the budget ensure that unsustainable production and consumption are arrested? For one thing, prices can be influenced by taxation, to inform the customer and the producer about the cost to the environment and the natural resources of a product. An efficient or environmentally friendly refrigerator, for instance, as also an efficient automobile, must carry lower taxes than one that is inefficient. Similarly, the purpose behind taxing flush toilets should be to force the waste disposal industry into finding a cheap, non-water-using toilet. The purpose of these taxes would be less to raise revenue for governments and more to modify economic behaviour.

In this context, technological innovations to reduce adverse environmental impacts would be encouraged provided adequate incentives were provided. Through a well-conceived system of incentives and taxes, the budget can combat the current pollution levels. An emission based excise tax can encourage manufacturers to introduce better technology quickly. For instance, the Green Rating of the automobile sector by the Centre for Science and Environment shows that around 80 per cent of the passenger cars meet Euro-iii norms.

The other issue is the regulation of our subsidies, so that while the "good" is rewarded -- like organic agriculture -- the "bad" -- chemical fertilizers -- is not. The budget can be a real tool for the management of the economy and not just of fiddling with account books.

But then, our fear is that this is asking for too much. The finance minister would be too busy balancing books.

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