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Tax emissions
December, 28th 2007
Rarely has the impending launch of a commercial product worked up so much lather in advance as Tata Motors much-awaited Rs 1 lakh car has done. RK Pachauri, who chairs the Inter-Government Panel on Climate Change (IPCC), one of the winners of this years Nobel Peace Prize, first told journalists that the Tata car was giving him nightmares at Rs 1 lakh, he figured, the car would be a best-seller and would give rise to large volumes of fresh carbon emissions. That got a quick response from RA Mashelkar, who for many years was the head of the Council for Scientific and Industrial Research (CSIR), and who is now on the Tata board. Dr Mashelkar is reported to have said that he had sat in the car and it was both comfortable and ran 25 kilometres on a litre of petrol/diesel implying that those who bought the new Tata car instead of any of the existing car models would actually contribute to cutting down emissions.
 
Dr Pachauri missed another point. If he feels that affordable pricing of the new Tata car will lead to a surge in sales, and therefore emissions, what does he have to say about the sales of two-wheelers or second-hand cars, which are also growing by leaps and bounds? And why should scooterists not be allowed to upgrade to cars, as a matter of consumer choice? The issue therefore is not one car or another, or for that matter scooters, but public and private transport. People may own personal transport vehicles and yet prefer most of the time to use public transport if it is fast, comfortable and easy to use, especially because that provides an escape from traffic snarls, parking hassles and other aggravations. The transport sector is responsible for a fourth of the worlds energy-related greenhouse gas emissions, and three-fourths of this comes from road transport.
 
It may be a good idea therefore to fashion policy such that emission control is achieved. Given the speed with which incomes are rising, and the slow progress in providing comfortable public transportation, it is obvious that the use of personal transport vehicles will continue to grow rapidly. Any automobile policy must therefore take into account, not just the engine capacity and/or the length of a vehicle (as happens today), but emission levels as well. That is, the excise duty on automobiles should not be dependent upon the length of a car or its engine capacity, but fixed according to its carbon footprint. Auto majors will argue that singling out the industry is unfair and that such a policy should await a national policy in all areas. A national policy is obviously desirable, but a start has to be made somewhere; and given the auto sectors contribution to additional emissions, this is a good place to begin.
 
Before that, though, the government needs to correct the existing distortions in the system. For instance, the finance minister reduced the excise duty on small cars a few years ago, using the logic that this would transform India into a global manufacturing hub for small cars. That may be fine ecologically, since exports do not add to Indias carbon footprint. But given how investments in public transport will go a long way in curbing fresh emissions, it is a travesty that excise duties on vehicles used for public transport are higher than those on personal transport vehicles.
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