Fuel tax to speed up MRTS in the works

NEW DELHI: The urban development ministry has mooted a fuel tax on the lines of gas tax in the US. The ministry would soon discuss the plan with petroleum, finance ministries and state governments to impose a tax of up to 30 paise per litre.

The revenue generated through the levy would be pumped into the proposed Rs 5,000-crore National Transport Revolving Fund that would finance a state-of-the-art mass rapid transit system in the country.

The US federal gasoline tax as of 2005 was 18.4 cents per gallon. The gasoline tax in various states range from 10 cents to 33 cents, with an average about 22 cents per gallon.

“We have to see various aspects of such a tax before we go ahead. Participation from states is also very necessary for success of the policy,” Urban development secretary M Ramachandran said. The ministry is in the process of preparing a cabinet note to this effect.

The ministry also wants a performance-linked scheme for disbursal of transport funds for states. The states coordinating with the Centre on the tax would get funds from the revolving fund.

“The money could be used for various transport development purposes such as introducing new bus fleet, metro rail systems and modernisation of transport systems,” a source said.

At present, an education cess of 3% and highway cess of 1% are levied on both petrol and diesel.The urban development ministry believes the government is in dire need of funds to boost public transport in the country.

“We would ask states to subsidise travelling charges for public transport and compensate the loss by charging cess on fuel,” he said. Money would also be spent to set up street furniture, horticulture and pedestrian facilities.