Budget skirts the real issues, does not do enough for environmental concerns: CSE

  • Finance minister loses courage to put fiscal breaks on SUVs and diesel cars

  • Budget fails to put forward any new proposal to strengthen bus transport

  • Uses tax measures for electric, hybrid and fuel cell vehicles – but does not address the real concerns over toxic emissions and fuel guzzling in the mainstream vehicle segment

  • Ignores the mobility needs of the poor and majority in our cities

  • It will be a joke on the nation if the Parliament lets this pass despite series of recommendations from expert bodies to eliminate incentives for SUVs and diesel cars and despite the persistent demand for better bus transport system.

  • This inaction will cost hugely to the nation and our health

  • The Rs 3,000 crore energy fund is also a miasma: it proposes to allocate some of the money for purposes which have nothing to do with energy

New Delhi: February 28, 2011: Centre for Science and Environment (CSE) expresses deep anger and shock at the lackadaisical attitude of the finance minister in the recent Budget towards energy guzzling vehicles and the need for public transport in our cities. It is shameful that the minister has seen nothing wrong in the misuse of subsidised diesel by rich car owners and in making the state bear the burden of subsidy and suffer revenue losses on account of this luxury consumption.

Why is there no scheme and more tax measures to support bus transport?

The new budget has not proposed any new scheme to support bus transport which meets 40 to 70 per cent of travel needs in our cities; only a few metro lines have been proposed as a cosmetic gesture. It has also ignored a further cut in excise duty on buses – at least to 4 per cent. This is urgently needed to cut capital expenditure in cities that are desperate to scale up public transport. All cities are paying enormously in congestion and health costs due to uncontrolled and explosive increase in car traffic.

Why is the minister encouraging subsidy for SUVs and diesel cars?

CSE had drawn the attention of the finance minister to recent trends that show that the car industry is on an overdrive to introduce more diesel car models even in the small car segments. The combination of cheap diesel and lure of lesser taxes on small cars will make diesel car numbers explode. Already, diesel cars are 36 per cent of new car sales; they are expected to touch 50 per cent soon.

We need answers to why the government has decided to continue to support the use of subsidised diesel for luxury consumption. Revenue losses will compound with the increased share of diesel cars and SUVs. In Delhi, for instance, this loss amounts to about Rs 300 crore a year. “How can the finance minister justify this?” asks Anumita Roychowdhury, executive director-research and advocacy, CSE. “The market trend clearly shows that diesel is aiding the shift towards bigger cars that drink more fuel. While 85 per cent of petrol cars sold in India have less than1,200 cc engines, 64 per cent of diesel cars are just under 1,500 cc and the rest of them above. Despite fuel efficiency, bigger engines will always use more fuel and cheaper diesel will encourage people to buy bigger and more powerful cars. This will undermine energy security,” Roychowdhury adds.

The ongoing India assessment of the International Council on Clean Transportation shows that the trends can lead to a cumulative loss of 6.5 mtoe of energy between 2010 and 2020. This equates the fuel use of all four-wheeled vehicles in 2006. This defeats the objective of improving India's energy security.

It is ironic that the tax differential is being officially justified in the name of agriculture and freight. Cars use 15 per cent of the total diesel in the country compared to 12 per cent by buses and agriculture each, 10 per cent by industry and 6 per cent by railways.

Several committees including Kirit Parikh Committee have already recommenced additional excise duty to eliminate the incentives arising from the lower diesel taxes.

Tax measures are absolutely necessary to discourage diesel cars until the time clean diesel (diesel fuel with 10 ppm sulphur used along with advanced emission control system) is introduced. Health risks associated with conventional diesel emissions are very serious. Some of the deadliest air toxics, also carcinogens, are related to diesel emissions.

CSE demands

On bus transport

  • Further cut on excise duty on new buses to 4 per cent

  • Propose new schemes to augment bus transport in cities

On SUVs and diesel cars

  • Additional, substantial and effective hike in excise duty on diesel cars and SUVs

  • Align small diesel car definition with that of petrol cars. Currently small petrol car is legally defined as one with length not excedding 4,000 mm and with an engine capacity not exceeding 1,200 cc. For diesel small cars, this has been relaxed to 1,500 cc. Make it same as small petrol cars for the purpose of tax measures

  • Taxes must also begin to reflect the actual fuel use in cars to prevent shift towards bigger cars that uses more fuel and threaten energy security

For details, please contact Anumita Roychowdhury at anumita@cseindia.org or call her at 98117 93923.