Dear Mr State Finance Minister, it is time for your lessons in pollution tax. Nowhere in the world environmentally cleaner products are taxed high to put them at a disadvantage vis a vis the polluting ones

NEW DELHI, AUGUST 20, 2001: Centre for Science and Environment expresses shock and anger at the recent statements from the Delhi state finance minister Mahender Singh Saathi threatening to slap higher taxes on CNG and making it more expensive. While all his ministerial colleagues both at the state and the Centre, feeling uneasy over the spiralling demand for CNG that threatens the diesel market, are busy scuttling the CNG strategy by raising the bogey of scarcity and high costs, the state finance minister wants to use his ultimate weapon, - raise the price of CNG. Tempted to make money from CNG, Saathi unlike his colleagues actually concedes that CNG is the fuel of the future and can be a lucrative source of revenue. He wants to go back on the sales tax exemption that was granted by the Delhi government to the CNG vehicle buyers to expedite the Supreme Court order directing fiscal incentives for CNG conversion.

What the minister fails to understand is that technologies and fuels that are brought in to lower pollution and protect public health need fiscal support to make them competitive vis a vis the polluting ones. If the minister had been market wise and environmentally conscious he would have known that there are numerous options available to apply the `polluter pay principle' and raise revenue to meet the initial high cost of phasing in alternative fuel technologies like CNG.

CSE's estimate shows that an additional sales tax of Re 1 on a more polluting fuel like diesel in 1999 and 2000 would have fetched about Rs 300 crore - enough for the government to be able to give away more than 3,000 retrofitted buses free. Similarly, road taxes on private vehicles that emit more per unit of passenger carried, are dismally low in Delhi compared to other metros. The road tax for cars in Chennai for instance is not only twice that of Delhi but the tax for cars owned by companies is even higher. According to CSE's estimate even a one time increase of Rs 7,500 in the road tax for cars and Rs 2000 for two-wheelers will fetch the government an additional amount of Rs 45 crore and Rs 23 crore respectively - a total of Rs 68 crore a year. This revenue can easily be used to cross subsidise the users of public transport.

Since its known worldwide that the key barrier to CNG technology is its high capital cost, governments across the world have provided fiscal incentives for introduction of alternative fuelled vehicles like CNG recognising their environmental and public health value. The federal government in the US provides 80 per cent of the cost of a basic transit bus and 90 per cent of the incremental cost of a bus running on alternative fuel. Fiscal incentives are needed to make it easier for transporters to bring in more CNG vehicles and also to ensure that the increased capital cost of a CNG vehicles do not lead to increased commuter cost. If this system were in place this would have diffused all opposition from the transport lobby in Delhi.

The government has done nothing on its own to help implement the CNG order. On the contrary, it is now out to destroy the consumer interest in the CNG market. Only because of the Supreme Court orders Delhi government has designed some minimal fiscal incentives that includes sales tax exemption on autos and taxis and 6 per cent subsidy on interest on loans for autos and 4 per cent subsidy on loans for taxis from Delhi Finance Corporation. Clearly, now one of the incentives - sales tax exemption - is to be hacked for short sighted gains.

Saathi of course finds support from the Indraprastha Gas Ltd (IGL) and its patron Ministry for Petroleum and Natural gas to canvass for a price hike ostensibly to recover losses. But the Annual report of IGL itself is strong evidence that IGL is making profit consistently. The Annual Report of the IGL shows that the company has been making a profit since its inception. It had a net profit of Rs. 40.5 lakh in 1999-2000 and Rs. 1.8 crore in 2000-2001. With a very high level of demand for CNG, and over 100 per cent utilisation of its installed dispensing capacity, it is hard to believe that there is any pressing need for an immediate price hike. It is most inappropriate to compare IGL with Mahanagar gas Ltd in Mumbai, which is operating its installed capacity at 30-40 per cent capacity and running into losses.

Even the high initial investment cost of IGL can be offset if the Central government is imaginative enough to design appropriate fiscal instruments. But both the central and the state governments are averse to making any link with the countervailing health costs of air pollution, conservatively estimated by the World Bank at Rs. 1,000 crore per annum in Delhi and find ways of mitigating these costs through responsible fiscal planning, built on polluter pay principle.