Indian environmental group lobbies for additional taxes on diesel cars

Demand for more diesel cars in India is growing, even as environmental lobbyists and some sectors of the Indian government are supporting suggestions for higher taxes that will compensate for the subsidy given to diesel fuel. The Centre for Science and Environment (CSE) has been asking the government to impose higher taxes on diesel cars, citing the risks presented by the rapid dieselization of the country, including a drain on financial resources as well as health hazards. “Emission data shows that diesel cars, on an average, emit seven times more particulates and three-to-five times more nitrogen oxides than petrol cars. There is sufficient evidence that tiny particulates emitted from a diesel vehicle are toxic and carcinogenic,” said Anumita Roychowdhury of CSE. The environmental group is asking the government to impose an additional Rs 81,000 (US$1,594) excise tax on diesel cars. “While this amount should be imposed on cars with engines less than 1,400 cc, the amount should be doubled for the larger luxury cars that use more fuel,” Roychowdhury explained.
SIAM dismisses CSE’s claims
India’s auto industry body, the Society of Indian Automobile Manufacturers (SIAM) dismissed CSE’s concerns on emissions. SIAM Director-General Vishnu Mathur said, “Their (CSE) arguments do not make sense at all. Every fuel has its own emission pattern and diesel is not only more fuel efficient than petrol, even its CO2 emissions are less. As far as particulate matter and other emissions are concerned, we are in line with the government-stipulated norms.” SIAM has opposed additional taxes and is advocating the freeing of diesel prices along the lines of petrol, saying that market-determined prices will end the distortion in demand. The gap between petrol prices and subsidized diesel has resulted in a rise in the market share of diesel cars by 40%, from only 23%, in 2005-2006.
RBI echoes CSE’s concerns
India’s central bank, the Reserve Bank of India (RBI), has also suggested that the government deregulate diesel fuel and put a check on the increasing trade deficit as well as the dieselization of the country’s economy. In response to RBI’s suggestion which was stated in its third quarter review of monetary policy, S Jaipal Reddy, India’s oil minister said, “While their (RBI) suggestion has the academic relevance, we have to take all practical and political difficulties into consideration.” The Indian government currently subsidizes the price of diesel fuel, kerosene and cooking gas and state-owned fuel retailers sell diesel at a loss of Rs 14.57 (US$0.28) per liter. The government has vowed to cover one-third of the loss, and state-owned upstream companies are supposed to shoulder another third, while the rest is left for fuel retailers to absorb. Diesel is the main fuel used by the transport and farm sectors and the government has said that removing the subsidy would lead to an increase in the prices of prime commodities. (February 5, 2012)