Central and state taxes on passenger vehicles in India add up to 70%, making this the highest in the world, the Society of Indian Automobile Manufacturers (SIAM) said, urging the government to utilise the extra cess, charge or taxes currently being levied on diesel vehicles to promote environment-friendly options, instead of imposing a new cess.
The industry body recognised the need to incentivise and promote greener technologies, but said it would be too premature at present to further penalise the manufacturers of conventional vehicles.
Passenger vehicles attract the highest rate of goods and services tax (GST) at 28%. In addition, a cess of 3-22% is levied on diesel vehicles, depending on the size and engine capacity. Automakers have also been told to deposit 1% of the ex-showroom price of diesel vehicles as environment charge with the Central Pollution Control Board in the National Capital Region.
Besides, the road tax on diesel vehicles is higher than the petrol-powered ones — in Delhi, for instance, it is 25% higher.
Need a Holistic Approach: Bhargava
The taxes levied on diesel vehicles are already similar to feebates — incentivising environment-friendly practices and penalising those who don’t adhere to such practices — and are serving the same purpose as proposed, SIAM said in a submission before the government. “Therefore, the industry feels that as long as the overall taxation on vehicles is so high and graded, there is no justification or rationale for imposing any additional taxes in the form of feebates. Any additional taxes will hurt the auto industry by making the existing technologies more expensive.” ET has seen a copy of the submission.
SIAM said the industry would like to see that the additional revenue collected by central and state governments in the name of environment protection or pollution was earmarked exclusively and used for providing rebates to new energy vehicles.
“There is already a subsidy (for EVs) inbuilt in the tax rates outlined under GST. Electric vehicles are taxed at 12% compared to 28-50% for fossil fuel vehicles,” Maruti Suzuki chairman RC Bhargava told ET. “Besides, as far as small electric cars are concerned, I don’t think anybody can subsidise to the extent to make them affordable. There has to be technological improvements for that. If the immediate objective is to reduce fuel consumption, oil imports and pollution, one should look at creating infrastructure for CNG vehicles.”
As much as 85-87% of the cars plying on the Indian roads between now and 2030 would be non-electric ones, he said, adding that it was, therefore, important to look at the problem in a holistic manner, and not just by promoting electric mobility. “By then (2030), if you like to reduce oil import and pollution, what are your options? Your options are CNG, hybrid and biofuels. All these three technologies are required,” Bhargava said.
Any additional tax being considered on conventional vehicles should be viewed in the context of the impact it will have on the manufacturing and employment generating capabilities of the automotive sector, he said.
The automobile industry, along with oil marketing companies, is in the process of making investments of Rs 1 lakh crore to upgrade vehicles and fuels to Bharat Stage VI emission standards by April 2020. This is expected to reduce the harmful PM 2.5 emissions from diesel and commercial vehicles by as much as 90% when compared to BS-III standards. Given the nascent ecosystem and negligible penetration of electric mobility in India, any move to penalise vehicles powered by conventional fuels will end up jeopardising the existing industry, SIAM said.
“Feebates may make sense when we have made advancements in setting up the ecosystem, infrastructure and technology and reduced the applied rates of taxation on vehicles to the normal GST levels. Any feebates system before we reach that stage would be putting ‘the cart before the horse’, which can potentially do immense damage to the automotive industry,” it said.
SIAM director-general Vishnu Mathur said: “India is at a very nascent stage in its journey towards adoption and utilisation of electric vehicles. At this juncture, instead of disincentivising existing technology — which is the basic principle of a feebate policy — the focus should be on incentivising and promoting greener technology. A feebate policy is too premature for a market like India.”
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11 Comments on this Story
Jayeshkumar Panchal712 days ago
It is Not the Alternate Fuel or Batteries, that would solve the problem. ..it is Friction Brakes.
A Drastic Reduction in Energy and Fuel Consumption as well as Air Pollution, Heat and CO2 Emission from our Automobiles is possible by getting rid of those Friction Brakes, and using a Simple Energy Mechanism for the Recovery of the most of the Kinetic Energy while Braking and reusing that same Energy for powering the Next Acceleration!. ..just like in a pull-back Toy Car!. ..Trrrr (= Braking Action), ..Vroom (= A Free Acceleration!). A Unique Transmission Mechanism that Recover most of the Kinetic Energy while Braking, to offer a completely Free Acceleration as also incorporating a geared CVT for improving the Energy Efficiency; was shown at Autoexpo2000, New Delhi. ..18 years ago!.
Time for Automakers to Quickly Develop what would be known as a `Euro-6 Transmission'', to be used in all our Automobiles - Engine Driven, Hybrid or Electric; followed by Euro-8 and Euro-10 Transmissions within a decade. (Euro-6 Transmissions are intended/expected to recover at least 60% of Braking Energy and Recycle the same to Power the Next Acceleration, using only a Fraction of New Energy, Engine/Motor Power and Fuel/Battery Power to Accelerate; also incorporating a CVT like Transmission mechanism that would follow F=ma with at least 60% effectiveness; and gradually improving to Euro-8 and Euro-10 Transmissions, with 80% and >95% Braking Energy Recovery and Drive Efficiencies respectively).
Rahul Kundnani713 days ago
The problem of fossil-fuel powered vehicles is that they are affecting the global climate change; The global climate change effect would reduce drastically across the world in case the use of diesel/ petrol vehicles is banned.
The problem of auto-companies is still not evolved in reality. When Germany, Japan, United States will evolve as global market leaders in the world for Electric Vehicles manufacturing and would phase out the diesel and petrol vehicles, their exports are about to reach India as well.
And on that day, Indian Automobile companies who will still oppose the Govt''s Go-Green and global climate change prevention attitude, the majority of the Indian Automobile companies will have to shut down their businesses and stand dis-supported globally.
Feku Maharaj713 days ago
All of Feku''s so called reforms begins with cess. rob Peter to pay Paul is called reform