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Delhi Finance Commission moots congestion tax for city
October, 14th 2014

Owing motor vehicles and driving into certain areas of the city may become expensive for residents. The Fourth Delhi Finance Commission, in its report submitted to Punjab Governor and UT Administrator Shivraj V Patil on Monday, has recommended imposition of a congestion tax in the city.

The commission has stated that there is an urgent need to amend the tax-imposing provisions and the methods of calculating the tax liability under the Punjab Motor Vehicle Tax Act. It has recommended that the authorities, besides taxing motor vehicles for keeping and using them in the city, should “make the owners or drivers as the case may be to pay for causing avoidable congestion, affecting normal right of way of the human and vehicular traffic on public thoroughfares”.

Tax could also be imposed on owners in case of “parking their vehicle, except during the period of unplanned breakdown of vehicles, in respect of use of land forming part of public streets”. It is recommended that the tax be assigned and permitted to be collected by the Municipal Corporation.

The Ministry of Urban Development, in a letter to the administration last year, had proposed imposition of a congestion tax. As per the proposal, the residents were required to pay for entering certain areas of the city. The aim was to decongest the sectors and ensure smooth flow of traffic. This was, however, rejected by the corporation. With the recommendation now being made by the Finance Commission, the matter has got revived.

Chandigarh has around 11 lakh registered vehicles. Apart from this, there is a floating population of around one lakh vehicles. This causes frequent traffic jams on the roads in certain parts of the city.

The commission has taken a serious view of the non-recovery by the municipal corporation of the full economic cost of providing municipal services. The commission has observed that “given the low collection of the revenue from the available financial resources of the corporation on one hand and the incremental need to upgrade the city’s infrastructure, we fail to appreciate justification for providing municipal services without recovering full economic cost from the end users”.

The Delhi Finance Commission is under a legal obligation to make recommendations to the UT Administrator with regard to the Chandigarh Municipal Corporation. Headed by retired IAS officer P S Bhatnagar, the commission has two members, namely Dr M P Mathur from the National Institute of Urban Affairs and K S Wahi, who is member secretary.

In August last year, members of the commission had visited Chandigarh and held meetings with the officers as well as councillors to seek their recommendations.

The commission has recommended that the corporation should consider introducing differential economic taxing system in availing municipal services. This would imply that the economic surplus generated from one segment of the end-consumer or a group of municipal services is utilised in subsidising another segment of consumers or municipal service.

The commission has recommended that the share of tax appropriated to the MC by the administration should be increased.

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