Green body proposes 22% tax on diesel cars

By | July 8, 2016

Vehicle buyers may face a truly prohibitive tax, going up to 22 per cent of the vehicle cost, on diesel cars if the recommendations of the Environment Pollution (Prevention and Control) Authority (EPCA) are implemented.

Taking into consideration the health and environmental concerns, complicated by the lucrative lower taxes on the fuel, EPCA has recommended an ‘environment compensation charge’ (ECC) of 20 per cent tax on diesel vehicles under 1,500 cc and 22 per cent on those over 1,500 cc.

The massive over-2,000 cc diesel SUVs, which were earlier barred from plying by the Supreme Court, will ideally attract 24 per cent ECC, it said.

Global trend

The report notes that globally the health cost of diesel vehicles are computed into the cost of vehicles, which make diesel cars more expensive.

“A Euro IV diesel car in Europe has lifetime external cost up to five times higher than Euro IV petrol car. Thus, the pollution cost based on lifetime particulate emissions, costs of a diesel car and petrol car are €435 and €87 respectively. For NOx it is €220 and €70, respectively,” EPCA said.

The authority’s recommendation of 20 per cent (for less than 1,500 cc) and 22 per cent (for over 1,500 cc) green cess stands at ₹179,766 and ₹215,883 respectively.

Lack of data

These figures, the EPCA says in its report, underestimate the actual compensation that should be imposed, given the lack of quantifiable health damage data in India, which is available in developed countries.

The EPCA estimates that more 2.8 lakh people in Delhi are at additional risk of cancer considering the exposure to pollutants from diesel cars.

“However, due to the unavailability of comprehensive quantifiable cost of health damage specific to the Indian context, at present the same is not being factored into the ECC. This therefore underestimates the ECC,” the EPCA noted.

Fuel pricing

It further questioned the lopsided taxing regime on fuel, given that diesel, which is marginally more expensive than petrol (by ₹0.33) when it goes to dealers, becomes significantly cheaper (by ₹10.46 in Delhi) than petrol after taxes are imposed.

“Removing the fuel price differential through the imposition of ECC will be a step in removing the incentive for diesel vehicles. This is needed to reduce public health risk as diesel emissions are among the more harmful pollutants,” the EPCA noted.

(This article was published on July 5, 2016)
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