New levies on vehicles to drive transport services

NEW DELHI: You could soon be paying a bit more for petrol and for registering personal vehicles by coughing up new taxes such as congestion tax and green tax. Months after mooting the idea of setting up of a dedicated urban transport fund at the state level for upgrading transport infrastructure, the government has finally identified a tentative list of possible sources for the fund and circulated it to state governments.

The states are giving it a thorough study as many of the proposals would need legislative changes, according to an official in the Delhi government.

���The urban development ministry���s proposal is being studied by all our relevant departments, including transport and finance. It will take some time as it not just a matter of administrative decision-making but calls for legislative changes,��� an official in the Delhi government told ET on condition of anonymity.

As per the proposal, the funds so generated by states can be used for funding projects in urban transport such as Metro projects, compensate for exemption of tax on buses and replacement of assets of public transport companies and towards meeting the cost of various other concessions extended to encourage public transport.

���The idea behind the exercise is to steer people away from personalised transport to public transport,��� an urban development ministry official told ET. He added that while the Centre could contribute some amount to the fund, the majority has to be generated by states and municipalities.

At the city level, the ministry has proposed imposition of a betterment levy on land in areas which benefit by investment in urban transport projects. Other sources of funds include rationalisation of parking fee, property development tax, advertisement revenue on transit corridors and imposition of an employment tax on the lines of the existing tax in France.

Criticising the move, strategic consultant Vinayak Chatterjee pointed out that the government should focus on improving collection of property tax and user charges for utilities such as water, electricity and sanitation, instead of squeezing vehicle owners.

���The government always looks for the easy way out. The solution for improving finances is not by putting additional burden on private vehicles but by improving collection of various local taxes and user charges,��� he said.

The Centre, however, claims to have a logic backing its sourcing proposal. Since demand for petrol does not go down with an increase in prices in the short run, imposition of additional sales tax on the fuel would ensure sufficient accruals to the fund, the proposal said. It will also incentivise people to shift to the public transport system in the long run.

Other sources of funding at the state level identified by the ministry include additional registration fee on four- and two-wheelers, high registration fee for personal vehicles running on diesel, imposition of annual renewal fee on driving licences and vehicle registration and introducing taxes such as congestion tax and green tax.

The fund at the city level can be used for establishing a fare contingency fund to meet the difference between the public fare paid by commuters and the technical fare payable to the private operators to sustain the operations and to provide the urban local bodies��� share for funding urban transport projects, the proposal said.