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‘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?