NEW DELHI: Buying and running cars and two-wheelers could soon become a costly affair with a Planning Commission working group suggesting a green surcharge of Rs 2 on every litre of petrol, a green cess of 3% of the annual insured value of all private vehicles and a steep urban transport tax to be collected at the time of purchase of private vehicles.

The panel, headed by Delhi Metro chief E Sreedharan, has suggested urban transport tax on purchase of new cars and two-wheelers at 7.5% of the total cost of petrol vehicles and 20% in case of personal diesel cars.

The recommendations, which are guided by the "polluter pays principle", aim to discourage use of private vehicles by imposing higher taxes and also help generate resources to fund public transport projects.

It is estimated that the new surcharge and taxes will help the government generate Rs 235,741 crore in the 12th five-year plan (2012-17) and Rs 22,40,804 crore over 20 years.

It was decided not to impose the green surcharge on diesel considering the fuel’s multiple uses and the problems in dual pricing. However, this was offset with the higher urban transport tax on new diesel cars at 20% compared to 7.5% for petrol-driven variants.

The annual green cess of 3% is proposed to be collected through insurance companies. These firms, which collect around 4% of the insured value of the vehicle as annual premium, will now collect 7% and pass on the additional 3% to the government.

With huge investment needed in the urban transport sector which the Centre cannot meet from traditional budgetary sources, innovative financing mechanisms were being explored, an official said. Even public private partnership projects could only partially meet the funding needs, he added.

The resources mobilised from the new surcharge and taxes will be pooled in a dedicated national urban transport fund to meet the growing needs of urban transport.

The working group also suggested dedicated funds at the state and city level through resources like land monetisation, betterment levy, land value tax and hike in property tax. It also recommended imposing congestion tax, a cess on sales tax and hike in parking charges to generate resources for the fund.

Times View

A ‘green surcharge’ on petrol may seem like a good way of incentivising eco-friendly behaviour, but it’s actually not as good an idea as it sounds. For starters, the price of petrol in India already has a massive tax component and adding further to it amounts to over-burdening the consumer. Further, if the idea is to nudge people to use public transport and move them away from private vehicles, it is unlikely to work as things stand. The simple reason for assuming that is that most Indian cities have no public transport infrastructure worth the name. As the metro in Delhi has shown, creating world-class public transport will do more to move people away from private vehicles than trying to force them in that direction without any viable options.

