core sector communique

Budget 2012 is a mixed bag, says CSE

Supports the tax hike on big cars and SUVs

But says budget is incomplete, as it has failed to take steps to stop misuse of diesel fuel subsidy by cars

New Delhi, March 16, 2012: Centre for Science and Environment (CSE) supports the tax hike on big cars and SUVs brought on by the Union budget 2012. Excise duty on large cars has increased marginally from 22 per cent to 24 per cent. MUVs and SUVs will attract higher duty – up to 27 per cent. Says Anumita Roychowdhury, CSE’s executive director-research and advocacy and head of its sustainable mobility team: “This is urgently needed to discourage fuel guzzling and reduce toxic emissions.”

At the same time, she points out that it is unacceptable that while the budget speech of the Union finance minister says that it needs to reduce subsidy bill to 2 per cent of the GDP in three years, it fails to restrain use of subsidized diesel in private diesel cars. If this is not controlled, both the government as well as public sector oil companies will continue to bleed. In fact, the budget speech states that the government has absorbed the duty reduction in the petroleum sector with total annual revenue losses of Rs 49,000 crore! Will the government continue to let its treasury bleed to support the massive dieselization of the car segment?

The budget has ignored that dieselization is rapidly growing in the small and medium segments and has left it untouched. The proposed tax hike will only affect cars with engine sizes of more than 1,500 cc for diesel and 1,200 cc for petrol cars. But this will hardly make any difference in the popular models in the small and medium car segments where sale of diesel models is as high as 50-75 per cent. Despite the recession, diesel car sales have jumped 34 per cent in 2010-11.

This inaction on diesel cars will add to our health budget. The media is already abuzz with spiraling cancer risks in Indian cities. Policies must reduce environmental risk factors that include toxic diesel emissions. The WHO, International Agency for Cancer Research, California Air Resources Board and US Environmental Protection Agency have branded diesel particulates as human carcinogens and implicated them for lung cancer that is also rising in our cities.

A recent global study on heavy exposure to diesel exhaust, published in the Journal of the National Cancer Institute in March 2012, confirms the link between lung cancer deaths in miners and diesel exhaust. It states that the occupationally exposed group has five times the risk than the lowest exposure group. According to the National Cancer Institute, this landmark study’s findings suggest that the risks may extend to other workers exposed to diesel exhaust, and to people living in urban areas where diesel exhaust levels are elevated.

Other governments have taken stringent fiscal action. Brazil has banned diesel cars as it taxes diesel low. In Denmark, diesel cars are taxed higher to offset the lower prices of the fuel. In China, taxes do not differentiate between petrol and diesel, while Sri Lanka uses taxation to discourage diesel cars and has reversed the dieselisation trend and diesel fuel consumption in its transport sector.

Says Roychowdhury: “This proposal for the vehicle sector must be reviewed to take corrective action to discourage use of subsidized diesel in the car segment. This only benefits the rich car owners.”