Environmental issues well under control in India: The Finance Minister says so

This article is in two parts. To get the ball rolling, we reproduce an article that appeared in the Hindustan Times on 28 February announcing that: “India’s bid to be seen as an environment friendly country got a stamp from finance minister Pranab Mukerjee”. Sound good to you. Well hang on and read the second half of our piece here which features a commentary by Anumita Roychowdhury in which she ventures: “Budget skirts the real issues, does not do enough for environmental concerns”.

Mukherjee unveils green rebates

- Hindustan Times, New Delhi , February 28, 2011

India’s bid to be seen as an environment friendly country got a stamp from finance minister Pranab Mukerjee, who announced a slew of tax rebates to promote green technologies and a National Mission on hybrid and electric vehicles. The budget indicated the government’s intention to promote cleaner fuel, such as hydrogen and electricity, for the automobile industry, which witnessed 30% growth in 2010. The sector had been severely criticised by environment minister Jairam Ramesh, who termed diesel and Sports Utility Vehicles (SUV) as polluting India’s urban air.

However, there was no increase in duty on SUVs, which Sunita Narain, Director Center for Science and Environment termed “unacceptable”. Kirit Parekh, former member of the Planning Commission and chairperson of the expert group on low carbon strategy for inclusive growth said, “The measures will certainly help in reducing urban air pollution, but I am not sure on what sort of impact it will have on India’s (climate change causing) green house gas inventory.”

The country’s urban air quality has deteriorated rapidly in the past five years, with road development not at par with the rate of vehicular growth.

Mukerjee, who had earlier provided funds for 15,260 low floor buses, has proposed additional funds for development of metro networks, an alternative to use of personal vehicles in cities such as Chennai, Kolkatta and Bangalore. However, for Delhi and Mumbai metros, the Central assistance has been reduced.

The FM announced concessional excise duty of 10% for fuel cell or hydrogen cell technology. Import of parts of hybrid vehicles has been exempted from custom duty and a concessional rate of 5% excise has been proposed to incentivise their domestic production. In addition, the excise duty on a kit installed for converting a fossil fuel vehicle into a hybrid (such as CNG) has been reduced to 5%.

“To me, the budget scores nowhere on the green index. The sops for hybrids are nowhere. The FM has lost an opportunity to deal with the global fuel crises by reducing duty on buses to promote public transport,” Nairain said.

LED lights, considered 80% energy efficient to conventional lighting systems, would now attract an excise duty of 5% and exemption from Counter Veiling Duty (CVD). Import of another clean energy source, solar lanterns, hugely popular in rural India, will now attract custom duty of 5% as compared to the existing rate of 10%. Manufacturing of solar modules, which constitute solar panels, will not attract any custom duty henceforth.

Laundary soaps, which use less water and are gentle on soil, have been exempted from basic custom duty. Use of green processes instead of chemicals in the leather tannery industry will attract zero basic excise duty.

While the environment ministry’s budget increased by about Rs 300 crore to Rs 1,567 crore, Mukerjee also alloted Rs 200 crore each, for cleaning rivers and lakes of cultural and historic importance, other than the Ganga, and launching of the Green India Mission aimed to increase India’s forest cover by five million hectares.

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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 than 1,200 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 exceeding 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.

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About the author:

Anumita Roychowdhury is associate director at Centre for Science and Environment headquartered in New Delhi. She coordinates Policy Research and Advocacy on vehicular pollution in India for the “Centre for Science and Environment” (CSE), New Delhi, India. She has helped build policy campaigns which include phasing in of CNG program in Delhi; advancing implementation of improved fuel quality norms and emissions standards in Delhi; and promoting fiscal policies to improve technology, and awareness campaign on fuel adulteration in Delhi. She co-authored the book “Slow Murder: The Deadly Story of Vehicular Pollution in India” and has contributed to the series on Citizens Report on the State of India’s Environment. www.cseindia.org

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