‘GREEN TAX’ ON OLDER VEHICLES
2021 JAN 29
Mains >
Environment & Ecology > Pollution > Air pollution
WHY IN NEWS:
- The Ministry of Road Transport and Highways decided to levy a green tax on transport vehicles older than eight years, from April 1, 2022.
WHAT IS GREEN TAX:
- Green tax is an excise duty on goods that results into the environmental pollutants
- It is charged at the time of renewal of fitness certificate
- The revenue so collected will be kept in a different account and will only be utilized for tackling pollution.
- States can set up state of-art facilities for emission monitoring.
RATIONALE OF THE INITIATIVE:
- Commercial vehicles constitute about 5% of the total vehicle fleet and contribute about 65-70% of total vehicular pollution.
- The older fleet (before 2000) constitutes less that 1 % of the total fleet but contributes around 15% of total vehicular pollution.
- Older vehicles pollute 10-25 times more than modern vehicles.
SALIENT FEATURES OF THE INITIATIVE:
- Applications:
- Green tax is levied on transport vehicles – older than 8 years
- The Green tax will be 10% to 25% of road tax.
- Relaxation for personal vehicles:
- Personal vehicles – older than 15 years>> chargeable
- Incentivizes public transport:
- Public transport vehicles >> lower Green tax.
- Focused approach:
- Higher Green tax (50% of Road Tax) for vehicles being registered in highly polluted cities.
- Differential tax rates:
- Depending on fuel (petrol/diesel) and type of vehicle
- Exemptions:
- For electric and hybrids vehicles
- For vehicles using fuels -CNG, Ethanol and LPG
- Farm vehicles such as tractor
BENEFITS:
- Uphold ‘Polluter Pays Principle’:
- The Green tax is in line with polluter pay principle.
- ‘Polluter Pays Principle’ is part of the 1992 Rio Declaration which gives broader principles to guide sustainable development worldwide.
- It states that “Who produce pollution should bear the costs of managing it to prevent damage”
- Check urban air pollution
- Vehicular pollution contributes a significant part of city air pollution
- Dis-incentivizing polluting vehicles >> improves air quality in cities
- Combat health hazards by vehicular pollution:
- The major pollutants like carbon monoxide, lead, particulate matter etc. can have health impacts like reduced visibility, cancers, respiratory and cardiovascular ailments >> reducing older vehicles in city traffic will reduce such adverse impacts
- Progressive taxation
- Green tax will help poor who are worst affected by pollution, by taxing the non-poor.
- Promotion of public transport:
- As the public transport has relaxed rate of taxation under the Green tax regime
- Promotion of electric vehicles
- The initiative would motivate people to switch to newer, less polluting vehicles.
- More funding for curbing air pollution:
- Revenue from Green tax is exclusively used for tackling air pollution
CHALLENGES:
- Additional burden on consumers:
- High rates of taxation on petrol and diesel along with green tax will further spike the burden on vehicle owners >> affect the growth of automobile sector >> adversely affect investment and jobs
- May lead to inflation:
- Contributes to increase overall transportation cost which could surge inflation
- Fiscally regressive:
- The tax burden reduces as the spending capacity of the Taxpayer increases. Thus it will make Cars unaffordable for the middle-income groups while leaving the rich unaffected.
- Lack of alternative infrastructure:
- There is a crunch of charging stations, and similar other infrastructure for an easy, smooth transition to electric vehicles.
- Lack of clarity on utilization of revenue collected through Green Tax
BEST PRACTICE:
- German model:
- Germany imposed three green taxes on conventional power plants to boost renewable energy
WAY FORWARD
- Promotion of alternative infrastructure:
- Increase the use of hybrid and electric vehicles through promoting charging infrastructure, support to research and development, tax incentives for production and consumption of such vehicles etc.
- Support to weaker sections:
- Small operators such as autorickshaws could be offered low-interest loans, particularly to move to electric vehicles.
- Coordinated efforts:
- Ensure active involvement of all the stakeholders of the society, including local bodies, citizens, automobile industries etc.
PRACTICE QUESTION:
Q. Analyze the efficacy of steps taken by government to curb vehicular pollution in Indian cities?