Cess for clean fuel likely in the budget

  • Chetan Chauhan, Hindustan Times, New Delhi
  • Updated: Jun 17, 2014 01:10 IST

To check growing vehicular emissions, the government may impose a cess on diesel and petrol in the coming budget to leapfrog India’s transition into cleaner fossil fuels.

The government is looking at expanding Bharat Stage IV emission norms across India by 2017 — made mandatory in 13 major cities in 2010 — and Bharat Stage V norms by 2020 — reducing per vehicle emission burden by half.

The shift would cost about Rs. 80,000 crore (Rs. 800 billion) —about one-fifth of the Centre’s annual plan expenditure — and the government is not willing to bear extra financial burden considering fiscal constraints because of slowly growing economy.

It wants the consumers to pay for reducing toxic emission from vehicles by way of cess to be imposed on every litre of the fuel sold. An expert committee on Auto Fuel Vision and Policy 2025 this May recommended a cess of 75 paisa per litre for bearing the cost of technology upgrade in refineries to implement the proposed roadmap for transition.

Another step recommended was to bridge the cost differential between Bharat Stage-III and Bharat Stage IV fuels so that consumers opt for the cleaner fuel. Penetration of Bharat Stage IV petrol was 24% and diesel just 16% in 2013. “The amount collected as high sulphur cess will rapidly decline as the three-phase rollout to complete BS IV standards will be completed by 2017,” the committee headed by Saumitra Chaudhari said.

The two cess put would generate Rs. 74,000 crore (Rs. 740 billion) by 2021 and would help the oil companies to invest faster in technology upgrade. Without the cess, the committee said, changeover to Bharat Stage IV will not happen before 2025.

The committee had recommended to reduce sulphur content from 350 particles per million (ppm) to 50 ppm by 2017 and 10 ppm by 2020.

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