Tax our cars, Mr Finance Minister, not our buses: says CSE

New Delhi, January 16, 2008: The car is not the problem, but government policy is, says the Centre for Science and Environment (CSE), listing its demands for Budget 2008. The 9th Auto Expo will close on January 17, but its message should make us all sit up. Personal vehicle ownership is rising in India; it will grow manifold in coming years. There will be a few million more cars -- small as well as big, and many of them driven on toxic diesel -- jostling for that limited space on our limited roads. Air quality will only get worse, energy use will go up, and instead of moving ahead, people will actually grind to a stop due to congestion.

But this is government-made disaster because our policies are weak, says CSE, and it needs to be corrected. In a pre-budget letter to the Union finance minister P Chidambaram, CSE has set out a charter of demands for mobility and clean air for all. CSE released this letter to the media here today.

“We strongly believe that the current fiscal and regulatory policies do not adequately take into account the social, health and environmental costs of motorisation,” says Sunita Narain, director, CSE. In fact, current fiscal policies are distorted and downright wrong as they end up taxing the bus, which moves the largest numbers of people in our city -- more than the car, which drives few people but hogs valuable road space.

“We know currently that in spite of the phenomenal growth of private vehicles in our cities, large numbers – an estimated 60 per cent and above – still travel by bus or bicycle or walk to work. But while cars and two-wheelers move few in our cities, these vehicles fill up our road space and add to inefficiency in travel – congestion and pollution. The personal car in India has not replaced the bus, it has only marginalised it,“ says the letter.

Narain says: “Cars do meet our aspirations, but they cannot meet our needs. Our needs must be met by public transport.”

Four demands
The letter lists four key demands:

Firstly, it wants the government to completely remove the 16 per cent Central excise tax on passenger buses. It also wants the finance minister to provide guidance to state governments to correct the current policies, which tax the bus more than the car. “You will agree this is ridiculous,” says the letter as it cites examples to show how city governments charge between 2-23 times more to bus passengers than they do to car owners.

Secondly, the government must not reduce the existing tax rates on cars and SUVs but it must also maintain the differential taxes between small and big vehicles. Small vehicles must be taxed less. Any reduction on taxes on cars will only add to the subsidy being given to cars, as against buses.

Thirdly, it wants government in the Budget 2008 to increase the excise duty on diesel cars. Currently, car manufacturers use the price differential on petrol and diesel as a convenient loophole to sell cars that run on fuel of the poor. Either, the government should remove this differential or use fiscal measures to provide disincentives for the use of dirty polluting diesel in private cars.

Fourthly, it wants the finance minister to link Central excise duties to fuel efficiency standards once finalised and provide tax breaks to vehicles that meet advanced emission norms.

Put zero excise duty on buses to meet the transport needs of people
Since 1951, while India’s urban population has increased 4.6 times, vehicle numbers have increased 158 times. Cities are also struggling to keep pace with infrastructure demands – ever expanding roads fill up with growing traffic. During the decade (1996-2006), while the total road length in Delhi has increased by about 20 per cent, cars have increased by 132 per cent. Over 20 per cent of Delhi is under roads but congestion is increasing and today, the city could end up losing all the gains of its CNG conversion because of the exponential growth of private vehicles. Delhi, like Bangalore, adds roughly 1,000 vehicles each day on its roads.

Current estimates already suggest that congestion cost can be as high as Rs 3,000-4,000 crore per year in the city. A recent ASSOCHAM survey finds that on an average, people lose 2.5 hours every day to reach their destination. This is bound to get worse, as roads and flyovers fail to keep pace with the growing numbers. Road speed in Delhi, as in Mumbai and Bangalore, has actually gone down not up in spite of increased investments in road widening and flyovers.

“It is in this context that we must re-design our fiscal policies, so that we can promote mobility for all,” says Anumita Roychowdhury CSE’s associate director and the head of its Right to Clean Air team. 

Currently, the share of buses in the total fleet in India has dwindled from 11 per cent in the ‘50s to 1.1 per cent today. “This marginalisation is most acutely seen in the use of road space. In Delhi, personal vehicles – cars and two-wheeler -- use up more than 75 per cent of the road space but meet only 20 per cent of the commuting demand. But buses that use less than 5 per cent of the road space, meet more than 60 per cent of the travel demand,” Anumita adds.

Instead of encouraging bus transport with fiscal measures, our government imposes higher taxes on buses compared to cars -- says the letter to the minister. In Delhi, a car pays only Rs 300 a year as tax, while a bus is charged more than Rs 13,000 -- roughly 43 times more than a car. In Mumbai, buses pay Rs 41,000 per annum, but cars pay a lifetime tax of only Rs 9,000. 

CSE’s letter asks for a waiver on the central excise duty on buses to help reduce the capital cost of the rolling stock in cities. If this is done along with the recommendation in the budget proposal that the state governments must also make similar moves to waive off the state-level taxes on buses, it can make a radical difference to the mobility pattern in our cities. State governments should also be encouraged to raise funds through dedicated cess to fund public transport projects.

Already, car owners are enjoying enormous hidden subsidies in Indian cities. They do not pay adequately for the disproportionately high usage of road space or for parking. If parking charges are adjusted to reflect the costs of investment, it would work out to be Rs 30-40 per parking space per hour.

CSE has also demanded that fiscal incentives should be used for promoting significantly cleaner and more fuel-efficient vehicles. The government is currently working on fuel efficiency standards for vehicles.

Finally, CSE says we must understand that mobility, not cars, is the need of the day. It is clear India will have to re-invent what the world understands as the driver of economy – not the cheapest, smallest, biggest or most fanciful car but the cheapest, most affordable, convenient and comfortable way to travel.

For more details, please call Anumita Roychoudhury on 9811793923, 011-29955124, 29956110 or 29956399, or write to her at