Why shouldn't we tax CNG?

The Union revenue secretary, S Narayan , has no clue as to how fiscal instruments are designed to balance revenue priorities and secure a clean environment to protect public health. Lopamudra Banerjee had more questions for Narayan than he could answer

Published: Saturday 31 March 2001

What message are you sending by slapping an eight per cent duty on a clean fuel like the compressed natural gas (CNG)? Will it not jolt to the nascent CNG market, when the tax generated will amount to a mere Rs 6 crore? Won't it also jeopardise the Supreme Court's initiative to clean up Delhi's air?

I don't think this is a correct perception. Even motor spirit (petrol) and diesel, which are low in sulphur and benzene and Euro III standards (sic), are attracting excise duty.

In case you did not know Euro III standards do not exist in India. Only few cities have Euro II standards...

You must know better than me. But even when sulphur content is reduced from 0.05 per cent to 0.001 per cent it would attract excise duty. The connection between excise duty and clean fuel to my mind is a very specious connection. For us, all fuels for automobiles must have the same excise duty. There is no reason that there should be one fuel alone (read CNG) that should not attract excise duty.

Industrialised countries tax dirty fuels and give incentives to clean ones.

Excise is not a tax in the sense that you are talking about. It is simply the cost of manufacture and is value added. It is not a tax in that sense. The reason Supreme Court has gone ahead with CNG is because the approval for liquefied petroleum gas (LPG) for use in automobiles had not happened and has come about only now. LPG is a cleaner fuel than CNG and LPG attracts excise duty. So why shouldn't we tax CNG?

So you wanted to bridge the gap between the prices of LPG and CNG. Were you under any pressure from the private sector to strike down any advantage CNG might have over LPG?

No. There is no reason to exempt a fuel from excise duty simply because it is cleaner. The other clean fuels (sic) such as petrol, diesel or LPG also attract excise duty. We thought about all the alternatives and felt that there should not be any one fuel that is excise free and others that areconsidered equally clean and environmentally friendly fuels should pay excise (attempts to switch off the recorder).

By reducing the excise duties and increasing import duties on second hand cars, are you not helping automakers profit on one hand and push health costs due to a increasing vehicular fleet?

Are you against the private sector?

We simply want to know why the government...

I would like the recorder to be switched off.

Why is there no section on the environment in this budget?

I don't want to know what you think of us. Ask a revenue-related question and I will answer it.

Wouldn't the government have earned more revenue from an emissions-based tax, where a company adopting cleaner technologies got preference over its erring counterparts?

The budget does not segregate automobiles separately. It simply wants to clean up the existing excise-duty structure. We do not believe that the excise duty structure should be used to help or hinder any particular industry. We are going for a uniform excise duty structure. That is our only concern. Please ask your questions on environment-related tax to the finance secretary.

But as the revenue secretary you could have augmented revenue potential by taxing polluting technologies to meet the cost of environmental clean up. Does the government even have a vision to protect public health?

As far as revenue earning is concerned, I think we are very comfortable.

Don't you think that the budget gives out a clear signal that the government does not care for clean air and public health?

Thank you. Have a good day.

Would you like to answer the question?

No, I don't.

So I take it that you don't want to comment?

No, I don't.

Subscribe to Weekly Newsletter :

Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.