Mixed signals for vehicles, transportation

SUVs to be expensive but not diesel cars

By Anumita Roychowdhury
Published: Thursday 28 February 2013

The tax proposal for vehicles and transportation in the Budget tabled by Finance Minister P Chidambaram on Thursday is a mix of half-measures.

A green scan blinks on the good news first—excise hike on personal SUVs from 27 per cent to 30 per cent; higher import duty on high-end imported cars and motorcycles; subsidies for electric vehicles to continue until 2015; and the government to buy 10,000 new buses for cities.

In between the lines

When this is read with what the budget has omitted to do, this becomes an absurd game of one step forward, two steps back. Personal SUVs will pay more in excise but not the diesel cars that guzzle toxic diesel at nominal price but do not pay for using subsidised fuel. The government will help buy 10,000 new buses but bleed the public transport with high diesel prices fixed for bulk buyers and not help them cut their total tax burden. Such are the irresponsible streaks in the promised “responsible” budget.

Chidambaram has rightly reasoned in his budget speech that “SUVs occupy greater road and parking space and ought to bear a higher tax”. He has, however, been extremely careful about not highlighting their connection with fuel guzzling, toxic emissions and misuse of fuel subsidy to avoid action on other diesel cars. He looks away from the economic as well as public health fallout of the auto industry. Forecasts warn that the annual diesel car sales in the 2013 fiscal year may exceed that of petrol cars for the first time. He also ignores that even after increasing the excise to 27 per cent in the last years budget, SUVs have become the fastest growing product of the auto industry, fouling lungs and the air.

This time the pre-budget announcement on diesel price deregulation has deflected public policy attention from additional taxes on diesel cars. In the hope of fuel price parity in the distant future, the tax measure to cut dieselisation has been ignored. The interim measure of additional taxes on diesel cars, paid largely by those who can afford, could have brought funds to produce clean diesel for all—trucks, buses, generator sets and farmers.

Diesel price deregulation is needed and is inevitable. But this could have been planned better for the public transport with additional tax and pricing measures. The promised buses can deliver on their mobility goals only if their operations are affordable. The fuel cost, which is close to 30 to 40 per cent of operational costs of buses for many undertakings, has become unbearable.

Stop tokenisms

Bus transport is for public good but it is being made to bear a bigger burden of taxes. The report of the Sub-Group On State Road Transport Undertakings, formed under the Working Group on Road Transport constituted by Planning Commission for the 12th Five-Year Plan, has reported that “at present, 20 to 25 per cent cost of the buses is on account of taxes and duties accruing to the Central and state governments." It has even recommended: “Reduction of Excise Duty on public passenger transport vehicles…lead to positive externalities like reduction of vehicle congestion and reduction of carbon footprint.”

We need maturity and bite in fiscal measures for clean fuel and public transport. Political tokenism on fuel subsidy for diesel cars has to stop.


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