The Kirit Parikh Committee proposal for imposing a flat tax of Rs. 81,000 on diesel cars, including sedans and gas guzzlers SUVs and MUVs, may be worrying the big names in the industry, but environmentalists who have campaigned against ‘dieselisation’ of personal transport say the plan is too little and too late.
Mahindra & Mahindra, Tata Motors, Toyota, Mercedes, BMW and Volkswagen are unnerved by the proposal as diesel cars account for 35 per cent of the 1.5 million cars sold in India, and their sale is growing at 20 per cent, compared with an overall market growth of 12 per cent.
The Parikh Committee has also recommended a rise in the prices of petrol cars, together with a gradual increase in the rates of subsidised kerosene and LPG.
The flat tax recommendation is aimed at discouraging the use of diesel cars and utility vehicles, as they are not only gas guzzlers but also big contributors to pollution, their toxic levels six times higher than petrol-run vehicles.
Though diesel cars or sedans are more expensive, their low-running cost has made them popular among motorists.
The difference in price between diesel and petrol vehicles ranges from Rs. 70,000 to 1.50 lakh for different categories.
However, the Centre for Science and Environment says a mere Rs. 81,000 in duty on diesel cars to equalise the excise tax burden on petrol cars comes too late in the day and is insufficient.
“The yawning gap between petrol and diesel will continue to spark a deadly trend in dieselisation of cars and increase public health risks from toxic emissions. There has to be a substantial and effective increase in excise duty on diesel cars and SUVs, if the taxes on fuels cannot be equalised immediately,” says CSE director Sunita Narain.
Anumita Roychowdhury, associate director, CSE, and head of its air pollution and urban mobility team, says: “The market share of diesel cars is already over 30 per cent of the new sales and is expected to be 50 per cent in a couple of years. The industry has scaled up its diesel car production capacity, without having the requisite clean diesel fuel and technology in place.”
Ms. Nairain points out that the Parikh Committee proposes deregulation to allow fuel prices to move freely along with the international pricing trends, but has done little to reduce the differential in excise duty on petrol and diesel, which is nearly 70 per cent.
The committee’s justification for lower taxes on diesel is that it is used in essential economic activities such as agriculture and freight transport.
Ironically, the panel report itself shows that cars are the second biggest beneficiaries of the official tax policy. Cars use up to 15 per cent of the total diesel consumption in the country, compared with 12 per cent by buses and for agricultural activities, 10 per cent by industry and six per cent by the Railways.