The Delhi government's average annual earning from value-added tax (VAT) imposed on registration of diesel and petrol cars is nearly Rs 2,500 crore. The state earns another Rs 2,500 crore from VAT on sale of diesel and petrol as fuel. Any ban on the registration of diesel vehicles as ordered by the National Green Tribunal till January 6 is expected to impact the state's revenue collections unless buyers choose to switch to petrol cars. That may not be everyone's choice though as the lure of diesel vehicles lies in the price difference when compared to the rates of every litre of petrol. 
With a revenue target of Rs 24,000 crore for the current fiscal, the Delhi government faces the twin challenge of fighting the rising air pollution and keeping its coffers full. It is the revenue from VAT that the Arvind Kejriwal government is banking on heavily to deliver on its welfare promises. Till November, Delhi's VAT collection stood at Rs 13,000 crore.

In view of the NGT order, TOI takes a look at the revenue generation of the state from diesel and petrol-run four-wheelers. At a time when there is a wider focus on pollution caused by diesel vehicles, the revenue generation from car registrations only drives home the point that the capital is grossly car dependent and it will not be easy to get all the commuters onto public transport unless it is accessible, efficient and affordable.

On an average, the state earns Rs 2,500 crore annually from VAT (12.5%) slapped on registrations of four-wheelers. Most of these four-wheelers are cars. An assessment of registration of petrol versus diesel vehicles in Delhi shows that in the small-medium car segment, the ratio of petrol and diesel is that of around 60:40. In the luxury segment, a large number of buyers are more tilted towards diesel vehicles. In two premium luxury brands, the ratio of sale of petrol and diesel vehicles is found to be 30:70. In case of high-end cars, the sale of diesel vehicles is found to be 85%-100%. This trend shows that high-end car user is clearly dependent on diesel. Besides this, heavy vehicles like buses and trucks that are registered in Delhi are totally run on diesel.

Apart from this, a major portion of the VAT earnings come from tax levied on oil companies for sale to petrol pump dealers. VAT is also levied on these dealers for the sales they execute there. Though the levy imposed on petrol pumps is a smaller source of revenue, the same when added to the VAT collected from oil companies, could swell the state's coffers and fetch an earning Rs 2,500 crore annually. The rate of VAT on petrol and diesel is 25% and 17.3%, respectively.