That’s all the cesses add up to
The government has done well to ask the Supreme Court not to impose a cess on diesel vehicles over 2000cc—the SC suggested this as an alternative to the current ban on registering such vehicles in the national capital region—since these cesses are nothing but populism, on the same footing as the odd-even Delhi chief minister Arvind Kejriwal implements from time to time to try and check pollution. For one, as the government’s affidavit in the SC makes clear, there is little correlation between the size of an engine and pollution levels—a Tata Motors’ Land Rover with a 2933cc engine emits 0.019 gm/km of particular matter (PM) versus 0.029 for a 1493cc Mahindra XUV500; which is why this newspaper has been arguing for controls based on emission rather than those based on the size of the engine. Two, emission levels are a function of both the quality of the fuel as well as of the engines themselves. PM levels used to be 0.25 gm/km when India was at BS-1 levels in 1999 and this has fallen to 0.06 now under BS-IV—by BS-VI, it will be 0.0045, or the same across cars of all fuels. The government is committed to implementing this by 2020 since there are large costs involved for petroleum refiners and consumers who have to buy new vehicles. Given newer vehicles emit less, the SC ban on new registrations only makes things worse—according to the government, vehicles that are more than 10 years old pollute 10-12 times more than new ones.
Taxing diesel is an obvious solution, but the government’s reaction here is sclerotic. Cars in India are taxed by size and engine capacity. While smaller vehicles pay an excise duty of 12.5%, diesel vehicles of over 1500cc pay 24%—whether this 1500cc should be lowered to 1100cc or 1200cc is a matter of debate—and those with more than 2000cc pay 27-30%. There is an infrastructure cess of 1% on top of this, which rises to 2.5% for small diesel cars and 4% for bigger ones; registration charges for diesel cars are 25% higher than for petrol in Delhi. But if diesel cars pay more initially, the fuel is much cheaper. Thankfully, the huge subsidies of the past on diesel are now over, but while an excise duty of R21.48 per litre is charged for petrol, that on diesel is only R17.33. Populous states like Uttar Pradesh charge a VAT of 34.22% on petrol versus a mere 20.75% on diesel—Gujarat and Odisha have no discrimination. Apart from the fact that there is no baseline pollution data—the government is just getting this done—if the courts and the green tribunal are so keen to end diesel pollution, they should direct the Centre and the states to make excise/VAT uniform across fuels.