If you read my article, “An Appeal to the Government”, you would remember that I asked the government to increase the duties on fuel guzzling vehicles such as SUVs and other luxury cars to deter citizens from purchasing such vehicles. At the time I was, at the most, skeptical about the chances of such a policy to be implemented, but if recent reports are true, the government is actually going to put in place similar measures.
The excise duties on cars with engine capacity between 1500 and 2000 cc is expected to be increased by Rs 10000, while those with capacity in excess of 2000 cc would be increased by Rs 20000. Also, after other taxes like VAT, road tax and insurance are taken into account, the rise would be much more. Such a move is expected to raise up to Rs. 500 crores for the government, which isn’t a great deal when one takes into account the total estimated tax revenue mobilization of Rs 5,07,150 crore. In fact, critics of the move are calling it a drop in the ocean, while manufacturers are livid saying their sales would be affected.
It is easy to understand why the manufacturers are frustrated. However, how many people, who are ready to shell out over Rs. 15 Lac, would rethink the car they want to purchase just because they may need to pay around Rs. 30000 extra? And when you think of it, this may just be a futile attempt by the government. Their thoughts are noble indeed, and finally they are thinking long term to search for an answer to the oil price crisis, but a hike that small may not achieve anything indeed. All it would do is help alleviate a portion of the oil companies’ losses.
The extra duties need to be much more to force people to overlook fuel guzzlers for the smaller cars. Also, the cars should not be categorized based on the capacity of the car, but on the mileage. The hike does not apply to a Maruti Swift, but it does to the Maruti SX4. When one takes into account the Swift has an average mileage of about 12.5 KMPL and SX4’s to the tune of 12KMPL (figures based on claims from some of my neighbors), the extra duty does not sound fair for the SX4. So I suggest this is what the government can do: start an impartial system of checking the cars mileage, and use the results to levy duties on the cars.
Promoting such cars over fuel guzzlers has multiple rewards. Besides lesser consumption of fuel, it also means reduction in Greenhouse gas emissions and lesser congestion of roads and parking spaces. All of the above are serious issues that the country faces as of today, especially in metropolitan areas.
It is encouraging to see the government looking beyond subsidies. Hopefully, in the coming times, I would be writing more about them thinking along the requirements I said were necessary in the previous article.